Publication

21 March 2017

The FBAR Has a New Filing Deadline, Are You Compliant?

The due date for 2016 Report of Foreign Bank and Financial Accounts (FBARs) was moved forward to April 15 by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.  There is a silver lining, however.  FBAR filers who do not file by the April 15 deadline receive automatic six-month extensions.

Who is required to file an FBAR?

A U.S. person is required to file FBARs if that person’s foreign financial accounts’ aggregate maximum value exceeds $10,000 at any point during the calendar year.  The instructions define U.S. persons to include individual U.S. citizens, residents, fiduciaries, personal representatives, and trustees.  Parents of minor children who meet the requirement may also be required to file.  U.S. companies, tax-exempt organizations, and some disregarded entities are also subject to the FBAR rules.

What counts as a person’s foreign financial account?

The term foreign financial account is broadly defined.  In addition to bank and brokerage accounts held abroad, foreign financial account includes the cash value of foreign life insurance policies, online gambling accounts custodied abroad, some foreign retirement accounts, and other similar items.  If it can receive cash or liquidity transfers without much difficulty and it is outside the U.S., it is probably a foreign financial account for FBAR purposes.  A person is deemed owner if that person has a financial interest or signing authority over the account.

Is tax collected with the FBAR?

No.  However, U.S. taxpayers must pay income tax on income earned in foreign accounts.  Note also that the minimum penalty for failing to file an FBAR is $10,000.  The U.S. Department of Treasury likely collects this information in an attempt to reduce the amount of untaxed foreign earnings by U.S. taxpayers.  Some experts have estimated that the total amount of money hidden by taxpayers from their domestic government to be $20 trillion or more worldwide.

What should I do if I was unaware of my FBAR filing obligation?

You should retain an advisor to resolve the matter who can determine whether you have other foreign informational filing obligations and file your delinquent FBARs.  In seeking to abate penalties, it is crucial that you file delinquent FBARs before the government notifies you that you failed to file them.  It is often possible to file delinquent FBARs and avoid all penalties.

If you have any questions, please contact the authors of this article.

Notes:

  • The FBAR is filed with the U.S. Treasury’s Financial Crimes Enforcement Network and is formally called FinCEN Form 114, Report of Foreign Bank and Financial Accounts.
  • For 2017, the FBAR is due April 18, 2017, as are income tax returns (because April 15 falls on a Saturday and the District of Columbia observes Emancipation Day on Monday, April 17).
  • If a U.S. person willfully refuses to comply with FBAR requirements, that person may be criminally prosecuted as well.