FBAR Primer: Reports on foreign bank and financial accounts (101)
FBAR Primer on Foreign Bank & Financial Account Reporting
When it comes to international reports foreign bank and financial accounts, FBAR is the most common form that must be filed. Unlike other forms, the FBAR is generally required for almost all types of foreign bank and financial accounts, such as bank accounts, investment accounts, foreign pensions, and life insurance policies. Unfortunately, US taxpayers can be taken in the sow fear that they will find online when approaching the preparation of the FBAR form – especially if the taxpayer has undisclosed accounts from previous years. Additionally, much of the information online is outdated and inapplicable to most taxpayers who may only have a few offshore bank accounts. Here is a brief primer for individuals and other US persons who will be filing an FBAR in the current year.
What is the FBAR form?
The FBAR is an electronic form that is submitted directly on the FinCEN website and is not submitted to the IRS. the IRS is only responsible for assessing and executing sanctions. The FBAR form is used to report maximum account values for a U.S. person who has foreign bank accounts in which, on any day of the year, the annual total of the USD value of those accounts exceeds 10,000 $. It is important to note that this is not $10,000 per account, but rather $10,000 in total to determine whether or not the annual reporting threshold is met.
Is the FBAR a tax form?
A very important aspect of the FBAR form is that it is not actually a tax form – and in fact has literally nothing to do with taxes other than the fact that the IRS has been in charge of the application of the FBAR. The form is required even if a taxpayer has no taxable income generated by foreign accounts. In addition, even if the taxpayer does not have to file a United States tax return in the current year, if he is considered a United States person for tax purposes and meets the requirements threshold, he must still produce the FBAR form.
What overseas accounts should I include?
Essentially, almost all types of foreign investments and bank accounts are included in FBAR. Some of the most common account types include bank accounts, investment accounts, stock accounts, life insurance policies, and foreign pension plans.
Maximum account value
In a perfect world, the taxpayer would get the exact highest maximum account value in the reporting year and include it on the FBAR form. In reality, this may not be feasible. Especially with the Coronavirus still restricting travel and several foreign financial institutions requiring taxpayers to appear in person for specific information, it may simply not be possible to obtain all accurate information. Also, some foreign banks do not maintain taxpayer account information in the same way as in the United States, while other types of accounts, such as passbook accounts, are only updated when the taxpayer asks the foreign financial institution to update the book. Thus, taxpayers should do their best while making a reasonable and diligent search in the circumstances.
If the FBAR contains missing account information, do I still need to file?
Yes, just because the taxpayer may be missing some information or is unable to obtain all of the information needed for a perfect FBAR filing does not mean they are otherwise exempt from completing the form. This is not a test and therefore taxpayers should always try to complete the form in a timely manner including as much information as they can get.
How to submit the FBAR?
Since about 2013, the FBAR form is mainly electronic. The taxpayer must submit the form electronically on FinCEN Form 114 – unless certain exceptions or exclusions apply.
What if I need an extension of time to file FBAR
For the past few years, the FBAR has been automatically extended, which means that taxpayers have until October to file the form without having to request a specific extension. At the time of this article (March 6, 2022), the IRS has not yet released additional information confirming that the automatic extension will continue into 2022 for FBAR 2021 nor that any of the information or procedures have changed. , but it’s always important to check ahead of the filing deadline.
What if I had missed the year before
If a taxpayer has defaulted on their filing requirements in previous years, then they should ensure that they only start filing in the current year or submit mass filings from previous years outside of one of the filing procedures. offshore amnesty – in order to avoid making a Silent disclosure, which could result in significant fines and penalties. The IRS has several safe programs that a taxpayer can use to achieve compliance, and in fact some of these programs may result in a waiver of penalty.