If you have a financial interest in or signature authority over a foreign financial account that exceed certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing a Report of Foreign Bank and Financial Accounts (FBAR).
Under FBAR , United States persons are required to file if the person had a financial interest in or signature authority over at least one foreign financial account and the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the year. United States persons include U.S. citizens, U.S. residents, entities including but not limited to corporations, partnerships, and limited liability companies. Reporting is required even if the account produces no taxable income. Financial accounts could include bank accounts, securities accounts, mutual funds, “pooled funds”, insurance policies and annuities with a cash value. A note of caution. You may have a relative in a foreign country that has included you on an account or you inherited an account that exceeds the threshold. These accounts may fall under the reporting requirements.
FBAR reporting begins (for individuals) on Schedule B, Part III, Q. 7(a) 7(b) and Q.8. (The IRS has included questions related to foreign accounts for years but beginning in 2013, the questions became more detailed). If you answer “yes” and your aggregate value of all foreign accounts exceed $10,000 at any time during the year, then you must file Form Fin CEN 114 with the IRS no later than June 30 of the following calendar year being reported. The Fin CIN 114 is not filed with the tax return and it must be filed electronically. There are NO extensions. Willful failure to file could result in a civil penalty not to exceed $10,000 per account and an additional penalty up to the greater of $100,000 or 50 percent of the account balances.
U.S. taxpayers holding foreign financial assets may have additional filing requirements. If the value of your foreign assets exceed certain thresholds then you must file Form 8938, Statement of Specified Foreign Financial Assets.
These aggregate values are:
MFJ: $100,00 last day of year or $150,000 at any time
Other Taxpayers: $50,000 last day of year or $75,000 at any time.
The Form 8938 is attached to your tax return. The filing of Form 8938 does not relieve you of your filing the Fin CIN 114 and the reverse is also true. Again penalties for willful failure to disclose can be up to $10,000 per account and with the possibility of civil and criminal penalties.
FBAR is designed to bring information and people together to help stop money laundering, prevent corruption of the U.S. financial system, and fight terrorism. Most importantly, remember, as a U.S. taxpayer you are responsible for world-wide reporting of income.
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