FBAR (Foreign Bank account report)
FBAR - Foreign Bank Account Report is now a common tax acronym and topic especially for filers with financial accounts in foreign countries;
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).
Who must file FBAR returns:
United States persons are required to file an FBAR if:
The U.S. person had a financial interest in or signature authority over at least one financial account located outside of the U.S.; and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
U.S. person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States. It may be well noted, FBAR requirement applies to all US citizens living abroad.
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. This is an important point to be noted.
The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.
A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for non willful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50 percent of the balance in the account at the time of the violation, for each violation
Unlike with federal income tax returns, requests for an extension of time to file an FBAR are not granted. Account holders who do not comply with the FBAR reporting requirements may be subject to penalties.
If you have foreign assets in excess of certain threshold, there may be additional filings requirements.
Form 8938: Statement of Specified Foreign Financial Assets is filed along with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. Normally, form 8938 is filed if a MFJ taxpayer has financial assets exceeding $100,000 ($50,000 for single filers) on the last day of the tax year or more than $150,000 ($75,000 for single filers) at any time during the tax year.
- FBAR: June 30, 2016 – has to be filed electronically at: bsaefiling.fincen.treas.gov
- Business - Form 1120/1120 S – 6 months extensions 09/15/2016; Partnership/LLC – 5 months extension – 09/15/2016
- Individual - Form 1040 – 6 months extension – 10/17/2016
- Non-profit – Form 990 – Filing date 05/16/16 – 3 month extension - 08/15/2016.
There are various limitations, thresholds and procedures for many of the deduction and filings. Please consult your CPA/Tax attorney/or tax consultant for proper guidance with the above subject matter.
In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
Suresh Kumar, CPA, MBA is the Principal of Kumar Consulting, PA, a CPA & Consulting firm licensed in the states of FL, KS and MO and maybe reached at (813) 421-5068 or firstname.lastname@example.org/www.kumarconsultingcpa.com