Foreign Bank Account Report – FBAR
The Foreign Bank Account Report (“FBAR”) is a form that all U.S. citizens and U.S. residents are required to file if they have a foreign bank account with a value of at least $10,000 at any moment during the year. This requirement also applies to U.S. citizens living abroad, as well as Green Card holders and corporations.
What accounts do I need to report?
You’re required to report all foreign financial accounts, such as bank accounts, brokerage accounts, savings accounts, as well as certain life insurance policies and retirement accounts.
If you have more than one foreign account, you may be required to file an FBAR, even if the total value of your accounts never exceeded $10,000. For the $10,000 threshold, the IRS considers the highest balance of each account separately. If the total, when adding up the highest balances, exceeds $10,000, you’re required to file an FBAR.
The IRS requires you to report accounts you own separately, as well as accounts owned together with someone else. For example, an account owned together with a non-U.S. spouse must be reported on your FBAR. Furthermore, even accounts that aren’t yours must be reported on your FBAR, if you have signature authority over the account.
What’s the FBAR filing deadline?
Your FBAR for tax year 2022 is due on April 18, 2023. However, this deadline is automatically extended to October 16, 2023.
What to do if my FBAR is late?
The IRS acknowledges there are many Americans living abroad that may not have been aware about their filing obligations. If you meet certain requirements, you will not be subject to penalties. The IRS introduced two tax amnesty programs. The first is called Delinquent FBAR Submission Procedures. The second is called Streamlined Filing Compliance Procedures.
The Delinquent FBAR Submission Procedures are for taxpayers that do not need to amend their tax returns. If you have properly reported the income from the account for which you should have filed an FBAR, you’re not under examination by the IRS and have not already been contacted by the IRS, you generally qualify for these procedures.
If, in addition to not filing an FBAR, you also haven’t yet filed your U.S. tax return, you may qualify for the Streamlined Procedures. The most important requirement is that your failure is non-willful.
What are the penalties for not filing an FBAR?
If you meet these requirements and take action once you’ve realized you should have filed an FBAR, the IRS will generally not impose a penalty. This is important, as the penalties for not filing an FBAR are serious. If the IRS determines your failure to file is non-willful (i.e. that you made an honest/accidental mistake), the penalty can be $10,000, per account and per year. The penalty for willful non-compliance can be $100,000 or 50% of the value of the account that should have been reported, whichever is higher. In other words, even if the IRS determines you’re non-willful in your failure to file an FBAR and you’ve missed just 2 accounts for 2 years, the penalty can be $40,000.
Contact us with any questions you have about filing an FBAR. We specialize in the preparation of U.S. tax forms, including the FBAR, for Americans living abroad. We have offices in Denver, as well as Germany, Switzerland, the Netherlands and the United Kingdom.
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