A U.S. person who has a financial interest in foreign financial accounts must report those accounts on FinCEN Form 114, also known as an FBAR form.
The FBAR form includes a list of all foreign financial accounts held by the filer. The FBAR form also requires the filer to identify the type of account (e.g., bank account, brokerage account, etc.) and the name of each account owner.
An FBAR filer is an individual who personally owns (or jointly owns with a spouse) a foreign bank account that requires filing an FBAR for the reporting year. Individuals may electronically File their FBAR through the IRS e-File system without registering for an IRS e-File account.
If you’re an attorney, CPA, or enrolled agent, you must become a registered e-filer and file your FBAR as an institution instead of an individual.
What does FinCEN stand for?
FinCEN stands for Financial Crimes Enforcement Network.
Who has to file FinCEN Form 114?
A U.S. person must file an FBAR if they have more than $10,000 in foreign financial accounts at any time during the year. This includes both cash and non-cash assets.
Generally, an account at a bank located outside the U.S. is a foreign financial account, even if the account produces no taxable income. You should report all of your accounts at foreign financial institutions regardless of whether or not you owe taxes in those countries.
Note: International stocks, mutual funds, ETFs, and other securities that you purchase on a U.S. stock exchange generally don’t count as foreign assets. You’re holding them in a U.S. institution.
When is the deadline to file FinCEN Form 114?
The FBAR is an annual tax return, due April 15, following the calendar year reported. You can request an automatic extension to October 15 if you can’t file the FBAR by April 15.
The IRS may extend your FBAR due dates if you are affected by a natural disaster such as a hurricane. You should review relevant FBAR relief announcements for complete information.
How do you file FinCEN Form 114?
You must file the FBAR online through FinCEN’s Electronic Federal Tax Return system.
You don’t need to file the FBAR with a paper tax return. If you want to paper-file the FBAR, you must contact FinCEN’s Resource Centers to request an exemption from filing the FBAR electronically.
FinCEN will then send you the paper FBAR form to complete and mail back to the IRS at the IRS’s address in the form’s instructions. IRS will not accept a paper FBAR on T.D. F 90-23.1 (obsolete) or a printed FinCen Form 114 (for efiling only).
When you file an FBAR electronically, you must provide a copy of FinCEN Report 114b, Notice of Electronic Filing (NEFT), and a copy of FinCen Report 114a, Record of Authorization to File FBARs.
What records do you need to keep?
For each account you report, you must keep records including the name on the account, account number, name and address of the foreign banks, type of account, and maximum value during the year.
You must keep these records for at least five years from the due date of your FinCEN Form 114. Exception: An officer/employee who reports signature authority over an employer’s foreign bank account doesn’t need to keep records on these accounts, but the employer must keep them.
What are the penalties for not filing FinCEN Form 114?
You could face fines or jail time if you fail to report your foreign accounts. Penalties depend on the amount of money involved. You can get fined as much as $10,000 per year if you fail to file your FBARs on time.
If the IRS doesn’t contact you about a late FBARS and you’re not under criminal or civil investigation by the IRS, then you may want to file your late FBARS as soon as possible to minimize your penalty.
What if I’ve never filed an FBAR when I should have?
If you’ve never filed FBARs when you were required to, you can use streamlined compliance procedures to avoid penalties. It can be a good idea to talk to a tax professional to find out how to reduce your possible penalties.
Will the IRS find out if I fail to report foreign accounts in accordance with FBAR filing requirements?
FATCA is an act passed by Congress in 2010 requiring foreign banks to disclose account information about American citizens. Banks can’t do business with the United States if they don’t follow these requirements. The IRS uses this information to identify tax evaders.
What is the FBAR tax rate?
FBAR is not a tax. Holding money in a foreign bank account is similar to holding money in a U.S. bank account.
The purpose of an FBAR is so the government can make sure you’re not hiding potentially taxable transactions or committing other crimes.