File New FBAR Form by June 30 to Avoid Penalties
If you had a financial interest in or signature authority over a foreign financial account in 2013, the Report of Foreign Bank and Financial Accounts (FBAR) form that must be filed is different for the 2013 tax year. Failing to file the new form by the deadline of June 30, 2014 could result in significant penalties.
Last fall, the Financial Crimes Enforcement Network (FinCEN) introduced FinCEN Form 114, which supersedes TD F 90-22.1, the FBAR form used in 2012 and prior tax years. U.S. taxpayers with FBAR filing requirements must electronically file Form 114 by June 30, or face civil penalties, including fines of up to $10,000 per violation. Willful non-filing violations could result in criminal penalties and fines of $100,000 or 50% of the balance in the account (whichever is greater).
Many taxpayers incorrectly assume that a filing extension, granted by the IRS for the filing of an income tax return, extends the FBAR filing deadline. Because Form 114 is a Treasury form under the Bank Secrecy Act (BSA), extensions granted by the IRS have no effect on the FBAR deadline. In fact, there is no provision to request an extension of time to file an FBAR form.
The FBAR is used as a tool to help the Internal Revenue Service 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. 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 is required to file an FBAR?
U.S. citizens, residents, entities (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 if the aggregate value of all of their foreign financial accounts exceeds $10,000 at any point during the calendar year to be reported.
Foreign financial accounts include:
- Foreign bank account
- Foreign brokerage account
- Foreign mutual fund
- Indirect interests in foreign financial assets through an entity (interest greater than 50%)
- Foreign accounts held by a foreign or domestic grantor trust for which you are the grantor
- Foreign-issued life insurance or annuity contract with cash value
If you think you might be required to file an FBAR form for the 2013 tax year or prior years, contact me or another member of Kaufman Rossin’s international tax team for assistance. Kaufman Rossin can e-file the FBAR with the U.S. Department of the Treasury on behalf of our individual and business clients.
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.