“FBAR means if you have a financial interest in or signature authority over a foreign financial account. FFI includes a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds. The Bank Secrecy Act requires you to file FBAR reporting the account(s) yearly to the Department of Treasury”.
What is the FBAR?
Well as a start FBAR stand for Foreign Bank Account Report. which is required by the American treasury department, to track the money in offshore accounts only for Auditing purposes.
As a U.S. person if you have a bank account or you even have signatory authority over an account in a foreign bank you must file it.
Do I need to file?
You only need to file it if the account you own or you have signatory authority over has or reaches to $10000 anytime during the calendar year.
You should also know that if you have multiple accounts and the aggregate balance equal to or more than $10000 at any point during the tax year, you definitely need to file.
Is it Taxable
Form FinCEN 114 (FBAR) is only for reporting purposes.
For the IRS and US treasury department the reporting of foreign financial assets is not for tax purpose. Foreign assets definitely are not taxable, unless you sell or liquidate. You don’t need to worry.
When should I file?
Back then the FBAR used to have its own deadline which was different from the 1040 filing. Recently the IRS changed the FBAR filing to simplify the process. Now the US Expat should file for US tax and FBAR by April 15. And if you couldn’t adhere, it is okay, you get an automatic extension till June 15, and you can request an extension till Oct 15.
What is the difference between the FBAR and 8938 Form?
The Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts). Unlike Form 8938, the FBAR (FinCEN Form 114) is not filed with the IRS. It must be filed directly with the office of Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, separate from the IRS.
The FBAR report is required only by the Department of the Treasury. On the other hand, the 8938 form is required by the IRS.
As an expat, if you are single or married filing separately you only need to file the 8938 form if the value of your assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.
If you are married filing jointly the value of your assets needs to be more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
Specified domestic entities:
The total value of your assets was more than $50,000 on the last day of the tax year or more than $50,000 at any time during the tax year.
What happens if I don’t file?
If you truly didn’t know you should file, $10,000 per violation.
For willful violations, the penalty is the greater of $100,000 or 50 percent
of the balance in your account at the time of the violation, For each violation.
What if I haven’t filed before?
You should start filing immediately, to join the Streamlined Procedures Program, which waves all your penalties, late filing, and FBAR penalties as well.
To join this program, you basically need to file the last 3 years of Federal Tax Returns so as well as the last 6 years of FBAR.