foreign bank account report (FBAR)
2022-04-05 · 4 min read
The FBAR is a form you must submit to the IRS for your calendar year tax returns if
- You're a US person.
- During the calendar year you had a financial interest or signature authority over a non-US financial account with an aggregate maximum account value over $10,000.
An FBAR is a disclosure form. It doesn't affect the amount of tax you must pay.
My guess is that it's a tool used by FinCEN, who receives the data from the IRS, to track money laundering (AML) and sanctions violations (speculation).
Who is a US "person"? #
US person #
- a US citizen
- a US resident
- an entity (read. corporation, partnership, or LLC) created or organized in the US
- a trust or estate formed in the US
What is "financial interest" in a financial account? #
financial interest #
- You are the owner of record or holder of legal title. This applies regardless of whether the account is maintained for your benefit or the benefit of another.
- You also have financial interest in a financial account owned by either (1) an entity that you control >50% ownership or (2) a trust where you are a >50% beneficiary.
What is a "financial account"? #
financial account #
- A securities, brokerage, savings, checking, deposit, etc... account maintained at a financial instituion.
- A commodity futures or options account, an insurance policy with cash value (like life insurance), an annuity policy with a cash value, or shares in a mutual fund.
- A retirement savings account or other types of government retiree or pensioner programs.
Do "virtual currency" accounts need to be reported? #
TL;DR: No, but probably Yes soon.
However, FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account under 31 CFR 1010.350.
At the time of this article, the current guidance does not reflect this change; however, there is no doubt FinCEN is attempting to amplify the reach of the FBAR requirements with the objective of finding fraud, money laundering, and other financial crimes the forms are intended to detect.
What is "signature authority" over a financial account? #
signature authority #
- You (alone or in conjuction with another) have authority to control the assets in an account by direct communication with the holding financial instituion that maintains the account.
How does one determine the aggregate maximum account value? #
aggregate maximum account value #
- Determine the max currency held in the account during the year, called the "high-water mark".
- Convert the high-water mark currency value to USD if necessary.
- If the USD high-water mark is >$10k, then you must file an FBAR.
When is the FBAR due? #
April 15 for residents. June 15 for expats. Either can ask for a deadline extension to October 15.
What is the penalty for failing to file? #
Willful violations: $100k or 50% of the total balance of the foreign account. Non-willful violations: $10k per violation.
Wilfull violations may also face prison terms of up to 10 yr and criminal penalties up to $500k.
What information is needed for the FBAR? #
For each foreign account, you need:
- the account number
- the name and address of the foreign financial instituion
- the high-water mark account value in USD
- (if the account is jointly owned) the joint owner's identity
- (if the account is one you have signature authority) the account owner's identity