The FBAR (Foreign Bank & Financial Account Reporting) 2022
What is an FBAR?
What is an FBAR (Foreign Bank & Financial Account Reporting): The FBAR is a FinCEN form used to report foreign bank and financial accounts to the IRS. Technically, the form is called FinCEN form 114. Our FBAR lawyers have answered thousands of questions on matters involving the FBAR. We’ve summarized our answers to 25 of the most common questions we receive about reporting foreign accounts on FBAR. Please keep in mind that the rules and guidelines regarding FBAR change over time. For each year that you are going to file the FBAR, we recommend that you recheck the laws to make sure that your deposit complies with current FBAR guidelines.
What if I don’t have to file an income tax return?
Even if a person does not have to file Virginia bankruptcy laws for an income tax return, they may still have to file the annual FBAR.
In other words, whether or not having to complete the FBAR does not depend on whether or not the person has to file a US tax return. When the person is considered a U.S. person (more than just individuals) and meets the threshold required to complete the FBAR, they still need to complete the form, even if they don’t have to file an income tax return that time. that year.
When is the FBAR due?
The form is technically due when a person’s tax return is due, which is usually 4/15 of each year – or regardless of when the tax return is due.
Currently, the FinCEN 114 form is in automatic extension until October 15 (or depending on the October filing date when the extension falls in the current year).
How to file an extension?
The form extension is Automatique, so no form is required to extend the FBAR filing deadline.
What if I had the foreign accounts before coming to the United States?
This is a very common question / concern.
When a person files the annual FBAR, they provide the U.S. government with a snapshot of their overseas accounts.
It doesn’t matter if the account predates the person who became a US person.
So whether or not the overseas account was opened before or after becoming a US person, it is to be reported on the FBAR.
Do I have to complete the FinCEN 114 form if I live outside the United States?
Even when a person resides outside of the United States, they are still subject to the same FBAR reporting requirements as American persons who reside in the United States.
But what if the foreign money doesn’t belong to me?
Whether or not the money belongs to the declarant is not determinative of whether or not the account should be included in the FBAR or not.
If the account is in the filer’s name, it is presumably included in the FBAR – although ownership of the money may impact penalty mitigation issues.
What if none of the foreign accounts exceed $ 10,000?
This is also a very common question.
The specific account balance does not have to exceed $ 10,000.
Rather, the determining factor is whether the annual total of all the accounts combined exceeds $ 10,000 on any given day of the year.
If so, all accounts should be included in the FBAR, which should also include all dormant accounts.
What if none of the accounts are generating income?
The US government does not require foreign accounts to generate income for the account to be included in FBAR.
Therefore, even if the account does not generate any income, it still needs to be included in the FBAR.
What if I don’t know the exact account balances?
In general, it is better to report accounts with the best estimated maximum balance than to check the âunknown maximum balanceâ box – or worse yet, not to complete the FBAR at all.
Of course, the declarant does not have to completely guess or fabricate the amount of the balance. If the exact maximum balance is unknown and a reasonable estimate cannot be made, then the reporter can indicate the box indicating the unknown maximum value.
What if my minor child has accounts abroad?
Minor children must also file the FBAR. There are currently no exceptions to the FBAR filing for minors.
Is a foreign pension to be declared?
Yes – in general, foreign pensions must be declared.
Foreign pension accounts would be considered foreign financial accounts and therefore would be included in the FBAR.
Is a foreign life insurance policy reportable?
A foreign life insurance policy is reportable when it has a cash value or a cash value.
It is important to note that the reportable value would be the surrender or surrender value and not the face value of the policy, since the face value of the policy is not the current maximum value.
Do foreign investment accounts have to be reported?
Yes. and we realize that it can be very difficult, especially in situations where a person is trying to decipher the maximum value of a foreign mutual fund or SICAV in accordance with the NAV.
In this type of situation, the best available value should do the trick.
Are foreign stocks reportable on the FBAR?
Store certificates are generally not included in the FBAR. Conversely, actions accounts are reported on the FBAR.
Is foreign cryptocurrency on the FBAR?
There is no definitive guidance on the inclusion of cryptocurrency or other virtual currency in the FBAR.
You can find other resources that we have prepared for FBAR cryptocurrency to get a better idea of ââwhether you can consider reporting it or not.
What FBAR exchange rate should I use?
FBAR filers can use any exchange rate considered reasonable.
The two most common exchange rates used by filers are the average exchange rates published by the Internal Revenue Service and the exchange rates published by the Treasury Department.
What if I have already completed Form 8938?
Form 8938 is similar but not identical to FinCEN 114.
Just because a person filed Form 8938 in a given year does not exempt them from filing FBAR in the same year.
Some accounts should be disclosed on both forms, while other accounts and assets may only be required on one of the forms – and duplicate reporting is common.
Is a business file?
Yes, businesses such as corporations, partnerships and joint ventures may also be required to file FBAR if they meet the required threshold for reporting.
Is a Trust file?
Yes, if a trust is associated with one or more foreign accounts, then the trust must disclose the foreign account (s).
Is an estate file?
Yes – and with estates it can get very complicated as there may be a requirement for the deceased, the estate and also the beneficiary.
What if a deceased had accounts abroad?
If the deceased had overseas accounts, it is important to try to determine if the deceased also had an FBAR filing requirement – and if so, was the deceased compliant for previous years?
Ideally, this should be completed before filing the deceased’s final income tax return.
Non-voluntary or voluntary penalty
The majority of sanctions are of a civil nature (versus criminal).
Civil sanctions can be broken down into unintentional and voluntary sanctions.
While the penalties can be severe – and online fear is rampant – it’s important to note that not everyone is hit with penalties for willful misconduct.
We have separate resources to guide you on penalties.
Can I contest the penalty in Tax Court?
The FinCEN 114 form is not a tax form. Rather, it is an international reporting form and the penalties associated with the FBAR are not tax obligations.
Although you cannot challenge the penalty in Tax Court, you have the right to take the matter to Federal Court.
What about double counting?
This is probably the most common question we get.
Let’s say you have $ 100,000 in one account that you transfer five times, into five different accounts. On the FBAR, it will appear that you have $ 500,000 instead of $ 100,000.
Remember that the form is not used to declare the total amount of money you had abroad. Rather, it is used to signal maximum value of the different accounts you had.
It is common to transfer money to different accounts and it does not assume that the total balances on the FBAR represent the total amount of money available to the declarant.
What if I made a mistake?
It depends on the type of error. For example, was it an error in the balance statement or were accounts completely missed?
If this was an inaccurate report, the level of inaccuracy may determine the steps the reporter must take to resolve the inaccuracy.
For missed accounts, the registrant will usually have to go back and resolve the issue with one of the FBAR amnesty programs.