FBAR Provisions

What is an FBAR? FBAR is a colloquial term for Form 114, Report of Foreign Bank and Financial Accounts. Simply put,this requires the taxpayer to provide a summary of all foreign accounts held outside United States.Its filing is required by Bank Secrecy Act. Who are required to file? U.S. persons having interest in foreign financial accounts* and meet the reporting threshold. They include – • U.S. Citizens • U.S Resident Aliens • Trusts • Estates • Domestic Entities *Interest in foreign financial accounts may be due to taxpayer having Financial Interest or Signature Authority in or over the accounts. What is the filing threshold limit? Aggregate value of all financial accounts should exceed $10,000 at any time during the calendar year. In other words, we have to check for collective total of all accounts to determine aggregate balance greater than $10,000 limit and if total do exceed the limit, all accounts are reportable. What is reported? Maximum values in U.S. dollar, at any time during the year, of all the financial accounts*maintained by financial institutions located in foreign countries. *Financial accounts include, but not limited to – • Foreign Bank Accounts • Foreign Non-Registered Investment Accounts • Foreign Pension Accounts • Foreign Mutual Funds • Cash value of Foreign issued Life Insurance Policy or Annuity Contract How maximum values in an account are determined? Maximum values can be located from the periodic account statements. If an account is maintained in U.S. dollar currency, then, maximum value can be directly located and reported. If maintained in any other currency, you need to convert the maximum value of that account to U.S. dollar using year-end exchange rates. Bureau of Fiscal Service provides year-end exchange rates for various foreign currencies and can be located at- https://www.fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/ What is the due date for filing? It must be filed by April 15th, however, there is an automatic extension of 6 months. Hence, FBAR can be filed by October 15th. Where to file? It is mandatory to file FBAR electronically through FinCENs BSA E-Filing System. It is a separate filing and need not to be filed with Federal Tax Return. What are penalties for not filing FBAR ? • Non-Willful Violation–Civil Penalty of $10,000 per violation. No penalty will be imposed if there is reasonable cause for failure and balance in the account is properly reported. • Willful Violation–Civil Monetary Penalty, Greater of 1) $100,000 or 2) 50% of balance in the account at the time of violation. A taxpayer can also be subject to criminal penalties. Following are the penalties imposed under different sections of 31 U.S. Code –  Pay fine upto $250,000 or 5 years of imprisonment or both [§5322(a)] or,  Pay fine upto $500,000 or 10 years of imprisonment or both, if you violate another law of United States [§5322(b)]