FBAR and FATCA Information for Out of Country Tax Filing 

FBAR / FinCen 114 Tax Filing

Foreign Bank Account Reporting (FBAR) reported via the form known as FinCEN 114, was enacted by the US Treasury Department to uncover money laundering scheme and has also become a tool to uncover tax evasion.  Required reporting was enacted in 1970 but came under more scrutiny in recent decade.  FinCEN is the Financial Crime Enforcement Network, a bureau within the US Treasury Department.  An amnesty program for becoming compliant (offshore voluntary disclosure program), has expired. 

Threshold:  A US taxpayer with a financial interest in or signatory interest over foreign financial accounts with aggregate value exceeding $10,000 USD at any time during the tax year must file FinCEN 114.  Report the maximum balance of any one financial account during any period (day) during the year.  A combined total of maximum values that exceeds $10,000 must be reported on the FinCEN 114.

The FinCEN 114 is not submitted with your tax return.  It is filed directly with the Financial Crimes Enforcement Network (a bureau of the US Treasury, separate from the IRS) via the BSA E-filing system

As your tax professional, we can file your FBAR/FinCEN 114 forms as well as your tax return. 

Filing Process and Filing Deadline:

The filing deadline is April 15th with automatic extension to October 15th. 

To help bring awareness to the filing requirement and to bring more consistency to filing deadlines, the US Treasury Department has made the filing deadline the same as the individual tax reporting deadline, April 15th.  There is an automatic extension for filing the FinCEN 114 till October 15th.  There is no request for extension necessary.  To bring awareness and improve compliance, many tax professionals are also qualified to file the FinCEN 114 on behalf of their tax clients. 

George S. Boutwell

First Commissioner of the Internal Revenue Service (Lincoln Administration)

Foreign Financial Accounts to be Reported

  • Deposit and custodial accounts held at foreign financial institutions and foreign branches of US financial institutions.  i.e bank accounts.

  • Deposit and custodial accounts for which you have signatory authority.

  • Foreign stock or securities held in a financial account at a foreign financial institution.

  • Indirect interests greater than 50% in foreign financial assets through an entity.

  • Foreign mutual funds.

  • Foreign accounts and non-investment assets held by a foreign or domestic grantor trust for which you are the grantor. 

  • Foreign issued life insurance or annuity contracts with cash values.

  • Foreign Currency Determination:  Use the foreign exchange rate on the last day of the tax year to convert foreign currency balances to USD.  Use this FX rate regardless of the day of the year of highest balance.

Penalties:  Non-willful failure to file carries a penalty of up to $10,000.  Willful failure to file carries a penalty the greater of $100,000 or 50% of each account balance.  Criminal penalties can be assessed separately. 

Compliance Issues: 

The following options are available for individuals with FBAR delinquent filing issues:

  1. Streamlined Filing Procedures – This is an IRS program for delinquent federal tax return filers and combines FBAR filings into one program.  It is not available if you are compliant on your tax return filings but delinquent on FBAR filings.

  2. Quiet Disclosure – simply file delinquent FBARS and amended FBAR’s.

  3. Do Nothing – most risky

FATCA – Foreign Account Tax Compliance Act

FATCA was enacted and designed to uncover potential tax evasion. Reporting requirements begin in tax year 2011. FATCA requires reporting of certain financial assets held overseas which is accomplished via Form 8938, filed with your tax return.

Who Must File and What Information Must be Provided?

  1. US citizens, resident aliens and certain non-resident aliens who,

  2. have certain Financial Assets held overseas, and

  3. meet certain thresholds of financial asset value and certain filing status.

The original Form 1040

Three pages - no schedules (1913)

 Financial Assets

Numerous financial assets that must be reported on the Form 8938 for FATCA reporting purposes, including:

  • Deposit, Savings, and checking accounts held at banks or financial institutions overseas.

  • Brokerage accounts held at banks or financial institutions overseas.

  • Stocks or other securities, bonds and notes of a foreign corporation.

  • Partnership interest in a foreign partnership.

  • Interest in foreign retirement plan or deferred compensation plan.

  • Interest in insurance contracts, foreign annuities, or foreign estates. 

Reporting Thresholds

Reporting thresholds for individuals depends on whether you are married, file a joint US federal income tax return, and live inside or outside the United States. 

Taxpayers living Outside the US

o   If your tax home is in a foreign country, you meet one of the presence abroad tests as per the FEI exclusion tests, then file the Form 8938 if your thresholds of total foreign financial assets and status meet the following:

  • Unmarried Taxpayers (Single or Married Filing Separate)

    • Exceeds $200,000 on the last day of the tax year

      OR

    • Exceeds $300,000 at any time during the tax year

  • Married Filing Jointly

    • Exceeds $400,000 on last day of the tax year

      OR

    • Exceeds $ 600,000 at any time during the tax year

 Taxpayers living Inside the US

o   If you are a taxpayer living in the US, file Form 8938 if your total foreign financial assets meet the following thresholds:

  • Unmarried Taxpayers (Single or Married Filing Separate)

    • Exceeds $50,000 on the last day of the tax year

      OR

    • Exceeds $75,000 at any time during the tax year

  • Married Filing Jointly

    • Exceeds $100,000 on last day of the tax year

      OR

    • Exceeds $150,000 at any time during the tax year

 

Financial Foreign Assets should be reported at fair market value.  If the assets are denominated in a foreign currency (not USD), the currency determination date is the foreign exchange rate on the last day of the tax year, even if the maximum value was not the last day and even if the asset was sold prior to year end.   

Penalties:

Failure to file penalty is $10,000.

Continued failure to file is penalized and additional $10,000 for every 30 day period starting 90 days after IRS notice of failure to file.  The maximum additional penalty is $50,000.  Thus, you could owe up to $ 60,000 per tax filing year for failure to file. 

Failure to file penalties may be waived or partially waived if you can convince the IRS there was no willful intent to withhold information.  However, this determination is made by the IRS on a case-by-case basis. 

Criminal penalties may also be imposed if a willful failure to file to avoid paying taxes is determined by the IRS. 

Bona Fide Residents of US Possessions / Territories

Have certain financial assets that don’t need to be reported.

Foreign Financial Assets already reported on Form 5471, Form 3520, and Form 8621 do not need to be reported again on Form 8938. 

Given the intricacies of foreign asset reporting, it’s usually a good idea to consult with a tax professional to understand your filing requirements.