Don’t Forget to File the FBAR (FinCEN Form 114) by June 30
U.S. taxpayers with an interest in or signature authority over foreign financial accounts, with a total aggregate value that exceeds $10,000 at any time during 2015, must electronically file the Report of Foreign Bank and Financial Accounts (FBAR) form by June 30, 2016.
The Financial Crimes Enforcement Network (FinCEN) requires the filing of the FBAR, or FinCEN Form 114, in an effort to help the Internal Revenue Service (IRS) and the U.S. Department of the Treasury trace funds generated by illicit purposes and to identify unreported income maintained or generated outside of the United States.
Many taxpayers wrongfully assume that the IRS will grant a filing extension for the FBAR. However, for tax year 2015 there is no provision to request an extension of time to file an FBAR form. Failure to file on time can lead to significant penalties, including fines of up to $10,000 per violation, or worse, criminal penalties and fines of $100,000 or 50% of the balance in the account (whichever is greater).
Beginning next year, the due date for reporting these foreign accounts on the FBAR form will be April 15, 2017 and if requested, a six-month extension of time to file the form will be available. Please note that the FBAR filing does not satisfy the requirement to file Form 8938 (Statement of Foreign Financial Assets), which needs to be filed with an individual’s annual income tax return.
Who must file an FBAR?
U.S. citizens (including children), residents, entities (such as corporations, partnerships and limited liability companies) and trusts or estates formed under the laws of the United States are required (with some exceptions) to file an FBAR form for a calendar year if the total value of all foreign financial accounts exceeded $10,000 at any point during that year.
Foreign financial accounts include, but are not limited to: foreign bank or brokerage accounts, securities, savings, demand, checking, deposit, time deposit, foreign mutual funds, commodity futures or options account, foreign accounts held by a foreign or domestic grantor trust for which you are the grantor, foreign-issued life insurance or annuity contracts with cash value, as well as indirect interests in foreign financial accounts through an entity with interest greater than 50%.
If you think you may be required to file an FBAR form for the 2015 tax year or prior years, contact me or another member of Kaufman Rossin’s international tax team.
Maria Toledo, CPA, MST, is a International Tax Principal at Kaufman Rossin, one of the Top 100 CPA and advisory firms in the U.S.