Reminder: File FBAR (FinCEN Form 114) by June 30 to Avoid Penalties

Do you have a foreign bank account? Don’t forget to file the FBAR or you could face significant penalties.

Taxpayers with a financial interest in or signature authority over any foreign financial accounts with an aggregate value that exceeds $10,000 in 2014 have an obligation to file FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (FBAR), by June 30, 2015.

Significant penalties

Failing to electronically file the form by the deadline could result in significant penalties, including fines of up to $10,000 per year. Taxpayers found in willful violation could face criminal penalties including imprisonment and fines of the greater of $100,000 or 50% of the balance per year. There have been several cases in the past few years resulting in multi-million dollar FBAR fines, including the 2014 case of Beanie Babies founder Ty Warner, who paid the IRS more than $53 million in an FBAR penalty, in addition to about $27 million in back taxes and interest.

Last month the IRS issued new guidance regarding the penalties for failing to file an FBAR. “In most cases, the total penalty amount for all years under examination [for willful violation] will be limited to 50% of the highest aggregate balance of all unreported foreign financial accounts during the years under examination,” according to the memorandum.

There is no provision to extend the deadline for filing an FBAR form. Contrary to popular belief, filing an income tax extension with the IRS does not extend your FBAR filing deadline because FinCEN Form 114 is a U.S. Treasury form under the Bank Secrecy Act (BSA), not an IRS form.

Filing requirements for FBAR (FinCEN Form 114)

U.S. citizens (including minor children), residents, entities, trusts and estates are required 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%.

Last year was the first year that the Financial Crimes Enforcement Network (FinCEN) used Form 114 for FBAR filings, which replaced TD F 90-22.1 (used for 2012 and all prior tax years).

Have questions or need help?

If you think you may be required to file an FBAR form for the 2014 tax year or prior years, contact me or another member of Kaufman Rossin’s international tax team. Kaufman Rossin can electronically file Form 114 with the U.S. Department of the Treasury on behalf of our clients.