Beyond finding a new place to live, the move may involve adapting to a new culture, building a new social or professional network, and in some instances, opening a foreign bank account to manage your finances while abroad. 

Opening a foreign bank account isn’t a straightforward process for US expats, however. And depending on the amount of assets you hold in your foreign accounts, you may have to declare them to the US Treasury each year. 

Today’s article hopes to shed some light on these requirements! Here’s what you’ll learn:

• Why do US expats face challenges when opening a foreign account?
  • What is FACTA? 
• So you already have a foreign bank account… What is the FBAR, and who needs to file
  • What does the IRS consider to be foreign accounts? 
  • What are the penalties for not filing the FBAR? 
  • And perhaps most importantly… What do I do if I’ve never filed an FBAR before? 

Why do US expats face challenges when opening a foreign account?

To begin, all US expats must declare their worldwide income and (sometimes) foreign accounts to the IRS regardless of where they live. This is because the US is one of the few countries in the world (alongside Eritrea) that applies citizenship-based taxation.

Citizenship-based taxation is nothing new. In fact, it dates back to the Civil War. It’s the tax model under which people have to pay (or report) their income as a result of their citizenship with a country – regardless of whether they reside there. 

The interesting thing is that for many years, the IRS had no accurate way of tracking the financial activities of American expats. 

All of that changed, however, in 2010 with the introduction of the Foreign Account Tax Compliance Act (in other words, FATCA). 

What is FATCA? 

As someone who lives abroad, you may think to yourself, what’s the point of filing a return? How will the IRS know that I live overseas anyway?

Compliance became especially important when Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010. Under this Act, international banks in every country worldwide are now obligated to report the financial activities of their US clients to the IRS. 

One unintended consequence of this change, however, is that foreign financial institutions have become hesitant to accept American clients. Instead, some turn Americans away in an effort to avoid these additional reporting requirements. 

So you already have a foreign bank account… Who needs to file the FBAR 

The Report of Foreign Bank and Financial Accounts (FBAR) is a document you may need to file (using FinCen Form 114) to declare open accounts you hold overseas. The goal of the FBAR is to fight tax evasion and to take a measure of the maximum balances US expats hold in foreign accounts. 

The IRS specifies that if you meet the following criteria, you must file an FBAR:

• You hold at least one foreign account overseas that you have a financial interest in or signature authority over. 
• You hold $10,000 or more across your foreign accounts combined. 

Let’s break these down a bit further. 

The IRS determines financial interest based on who’s the owner of a record or legal title. On the other hand, a person with signature authority controls the disbursement of money or other property in the account using their signature. 

The deadline for filing the FBAR is on April 15th of each year. However, those who fail to file by the deadline receive an automatic extension to October 15th when filing Form 114. 

What does the IRS consider to be foreign accounts? 

Here are a few examples of accounts (outside the US) that the IRS classifies as foreign accounts:

• Bank accounts
• Foreign investment funds
• Retirement accounts

That being said, you don’t have to declare your foreign accounts if they fall into the following categories:

• Accounts owned by a governmental entity or international financial institution
• Accounts maintained in a US military banking facility
• Accounts held in an individual retirement account (IRA) in which you’re an owner or beneficiary  

What are the penalties for not filing the FBAR? 

The penalties for not filing the FBAR when you’re required to do so will depend on a few factors. Whether you willfully or non-willfully avoided filing will have a big influence. If you avoided filing the FBAR willfully, then the penalty will be much higher.

The penalty for non-willful non-compliance starts at $10,000 for each missed tax year. Willful non-compliance will come at a heftier price, sometimes up to hundreds of thousands of dollars: the IRS may charge you $100,000 or 50% of the balance in your foreign account. 

The amount of funds in your foreign account will also impact potential penalties. Just reaching the $10,000 threshold for filing versus holding tens of millions of dollars in unreported foreign accounts will impact the penalties the US Treasury may assess. 

Read More: Understanding FBAR Penalties

What do I do if I’ve never filed an FBAR before? 

Now, let’s say that you’re an expat who’s been living overseas for quite some time, and you hold more than $10,000 across several foreign bank accounts. If the first time you learned about your FBAR tax obligations is right now, the penalties we just described likely feel like an overwhelming possibility. 

However, let’s say it’s been years since you left the US, and the IRS hasn’t contacted you yet. Does that mean that you’re still likely to run into financial trouble? No, it does not, as the IRS offers a few ways of getting back up to speed with your filing obligations with a reduced (or no) risk of a penalty. 

To get started with the Delinquent FBAR Procedure, you need to file a statement that explains why you’re filing the FBAR late. As you file the form electronically, you’ll have to select a reason for filing late on the cover page of the form.

On the other hand, for those who have missed both tax returns and FBAR filing, the IRS has a Streamlined Filing Compliance Procedures program that allows US expats who live outside of the US to catch up without penalties. To qualify for the Streamlined Filing Compliance Procedures, you’ll need to:

• File your last 3 federal tax returns
• File your last 6 FBARs 
• Pay any taxes & related interest you have due
• Certify that your noncompliance was non-willful

Don’t Forget About Your US Tax Obligations While Overseas

It’s one thing to familiarize yourself with all the rules and regulations to remain IRS compliant. But if you feel like understanding and filing all the necessary paperwork is more trouble than it’s worth, or you’d like to be sure you’re doing things right the first time, you might consider seeking the help of a US tax advisor to eliminate stress and focus instead on things that are more important to you.

The post Holding a Foreign Bank Account as a US Expat: What You Need to Know appeared first on Bright!Tax Expat Tax Services.

Whether it’s to retire early or escape the current political climate, there are various reasons why people set their sights abroad. But this is an article about taxes, right? 

Let’s ground ourselves for a moment… As an American expat, you still have US tax obligations. And on top of filing a US tax return each year, you might also need to file the FBAR. 

In this guide, we go over everything US expats need to know about FinCEN Form 114, also known as the  FBAR. You’ll learn essential information such as who’s required to file the FBAR and the penalties in cases of non-compliance.

What is the FBAR? 

The Report of Foreign Bank and Financial Accounts (FBAR) is an IRS document that US expats must file to report their financial accounts held with banks located outside the US. Expats can ensure they are compliant with their FBAR filing requirements by submitting  FinCEN Form 114. 

Because of citizenship-based taxation, US expats must declare their worldwide income yearly to the IRS, regardless of where they live. The purpose of the FBAR is to fight tax evasion, illicit funds, and money laundering. 

When US taxpayers hold accounts in the US, the IRS is able to keep an eye on their financial activities because each taxpayer’s bank account is associated with their taxpayer ID (most commonly their social security number). That allows the IRS to monitor large financial transactions and know where each taxpayer holds their money stateside.

Now, you may wonder, how will the US know I hold foreign accounts that are located overseas? 

Since the introduction of the Foreign Account Tax Compliance Act (FATCA) in 2010, international banks must report the financial activities of US expats in their territory back to the US each year. This allows the US Treasury to gain a similar level of visibility to the financial activities of US taxpayers, even when they have bank accounts located abroad. This legislation has caused many inconveniences for US taxpayers who reside abroad, including, sometimes, the inability to open or hold a bank account outside the US. You can read more on that here.

Which US expats must file FinCEN Form 114? 

You don’t have to file FinCEN Form 114 unless you meet the requirements. The threshold to file states that you must file the FBAR if the amount you hold across foreign accounts surpasses $10,000 at any point during the calendar year. 

For example, let’s say you hold $4,000 in a Panamanian bank account and $6,000 in a Mexican mutual fund. In this case, you’ll have an obligation to file FinCEN Form 114 since the total amount of money you possess across your foreign accounts meets the FBAR threshold of $10,000. 

However, you don’t need to report foreign accounts to the IRS that fall into this list:

• – Correspondent or Nostro accounts
• – Accounts owned by governmental entities
• – Accounts owned by an international financial institution
• – Accounts maintained in a US military banking facility
• – Individual retirement accounts (IRAs)

What information do you need to file the FBAR? 

To file the FBAR, you need to complete FinCEN Form 114 with the following information:

• – Name on the foreign account
• – Foreign account number
• – The foreign bank’s name and address
• – Type of account
• – Maximum value on the account during the calendar year (that you must convert into US dollars)

What if my foreign account is jointly held with someone else?

If you hold a joint account with a spouse or someone else, you’ll also need to disclose that account on the FBAR.  

This causes some concern for non-US taxpayers who don’t want their information reported back to the IRS. That said, the FBAR disclosure does not drive any tax, so beyond the reporting of their account balances, the IRS has no further ability to tax or scrutinize them.

What about accounts that I can access, but are not mine?

Some people have access to financial accounts that they are not the owner of. Within the FBAR disclosure, this is called having signature authority. Believe it or not, even if you don’t own a bank account, but you do have signature authority over an account, it is subject to reporting on the FBAR.

An example of signature authority is if you have a minor child and the bank requires you to hold signature authority over their account until they reach age 18. Another example is if you are the treasurer at work, or in another organization, where you can write checks and manage the money within an account, but it is not your own.

How do I file FinCEN Form 114? 

You must file FinCEN Form 114 each year electronically through the BSA E-Filing System. You also have the option of letting a tax professional file the form for you as part of the tax preparation exercise. In doing so, your tax preparer will request Form 114a as documented authorization from you to submit the FBAR on your behalf. 

What is the FBAR deadline? 

You must file the FBAR to the IRS by April 15th of each tax year. However, if you fail to file the FBAR by April 15th, you will automatically benefit from an extension until October 15th. The extension is automatic, so it’s not something you need to request. 

Are there any penalties for not filing the FBAR? 

Non-compliance with your FBAR obligations can result in IRS penalties. How much you pay depends on whether you willingly or unwillingly failed to file FinCEN Form 114, with the IRS charging higher fines for the former. 

The standard penalty for failing to file the FBAR non-willfully is $10,000 for each that you don’t file. Willful non-filing, on the other hand, can cost you up to hundreds of thousands of dollars, depending on your situation.

I didn’t know I had to file an FBAR until now. How do I catch up? 

If you’ve been living overseas for some time and never knew about your FBAR obligations until now, there’s no need to worry. The IRS has a few different ways to get caught up penalty-free.

If you’ve been filing your US tax return each year, but didn’t know about the FBAR, the IRS offers the Delinquent FBAR Submission Procedure to catch up with FBAR filing penalty-free.

If you’ve failed to file FBARs because you didn’t know you had to file taxes from abroad, the IRS has a Streamlined Filing Program to help you catch up on both tax filing and FBAR disclosures.

Read more: IRS Streamlined Procedure | Bright!Tax

Let Bright!Tax Handle Your FBAR Filing

If you have more than $10,000 across foreign accounts but don’t want to go through the hassle of filing FinCEN Form 114, we can help. We’ve helped US expats worldwide with our FBAR Filing service to ensure they stay compliant and with minimal stress. Get started today by reaching out to one of our expat-expert CPAs.

The post FinCEN Form 114: How to File the FBAR appeared first on Bright!Tax Expat Tax Services.

In this article, we’ll give you a brief overview of what the FBAR and its standard penalties are, along with the context behind the Bittner v. United States case and how it might affect American expats in the future. 

What is the FBAR? 

The FBAR (also known as FinCEN Form 114) stands for the Report of Foreign Bank and Financial Accounts. It’s a form that all US expats who possess more than $10,000 across one or multiple foreign accounts must file annually. Foreign accounts include:

• – Bank accounts
• – Securities accounts
• – Foreign retirement arrangements

For example, let’s say you’re a US expat who lives in Panama but who also has residency in Paraguay. You have $8000 in a Panamanian bank account and another $3000 in a Paraguayan bank account. In this case, along with your US tax return, you’ll also need to file the FBAR. 

Read more: Foreign Bank Account Report (FBAR) Filing

What are the FBAR penalties? 

The range of FBAR penalties depends on whether your non-compliance was intentional or non-willful. The typical penalty for non-compliance that’s not intentional is $10,000, while willful non-compliance penalties can sometimes be hundreds of thousands of dollars. 

However…after working with thousands of Americans to catch up on their FBAR filing requirements  over these past ten years at Bright!Tax, we haven’t seen many FBAR penalties in real life. 

While a quick search on Google might reveal that some unfortunate FBAR penalty situations have in fact occurred over the years, many of those are high-profile cases. We’ve found that your average US expat taxpayer falls into one of the four categories below:

• – The US expat is completely unaware of their FBAR filing obligations. 
• – The taxpayer may be aware of their obligations, but decides not to file an FBAR anyway since the penalties don’t feel like a big deal to them. 
• – The taxpayer complies with their IRS obligations and makes sure to file their FBARs. 
• – The expat has less than $10,000 in foreign bank accounts, so they don’t need to file an FBAR in the first place. 

That said, it’s always better to be safe than sorry. In the case that you hold a significant amount of money abroad and don’t declare it to the IRS, you could land yourself in big trouble. And that’s exactly what happened to Alexandru Bittner. 

Bittner v. United States: What happened? 

If you’re not familiar with the Bittner v. United States case, don’t worry, Bright!Tax will fill you in. 

Bittner is a successful entrepreneur from the US who currently lives overseas. He possessed millions of dollars stored in different foreign bank accounts. Bittner was aware that he had to file his US tax return while living abroad but was inconsistent with his tax filing. At the same time, he wasn’t aware of his FBAR obligations, even though he had millions of dollars across several accounts abroad. 

Bittner claims that it wasn’t until he returned back to the US that he learned he had to file an FBAR form to declare his foreign bank accounts. However, even when he started to file his FBARs, the IRS reported that the amounts declared were inaccurate. 

As a result, the penalties that Bittner may have to pay for inaccurate FBAR filing range from $50,000 to $2.72 million. Bittner then became involved in a lawsuit with the US Supreme Court to push the court to finally decide how it will determine non-willful FBAR penalties. 

Here’s what Bittner’s lawyers had to say in a petition to the SCOTUS:

“The question presented is: Whether a ‘violation’ under the Act is the failure to file an annual FBAR (no matter the number of foreign accounts), or whether there is a separate violation for each individual account that was not properly reported,” say Bittner’s lawyers in the petition. 

How does the decision of the Bittner case impact US expats? 

The decision that the Supreme Court makes in the Bittner case can have serious consequences for Americans living abroad, and US expats must pay close attention. The SCOTUS will determine whether US expats will be subject to a penalty that is per form, per year, or per account, in case of unintentional non-compliance. 

If the IRS decides to apply penalties per form, then FBAR penalties will be set at $10,000 per year. In the case that the IRS applies penalties per account, however, then there is no limit: depending on the quantity of your foreign assets, you could end up paying millions of dollars in fines.

Let Bright!Tax Help you Stay FBAR-Compliant

If you weren’t aware of your tax obligations and have yet to file an FBAR, don’t worry. The IRS has an amnesty program called the Delinquent FBAR Submission Procedures to help expats catch up on their FBAR requirements without fearing penalties. 

To comply with their tax obligations, Bright!Tax has helped countless US expats navigate each step of the Streamlined Filing Compliance Procedures program. We’re also here to answer any questions you may have along the way. Register now to get in touch with one of our CPAs to assess your situation. 

The post FBAR Compliance: SCOTUS Determines How FBAR Penalties Will Apply appeared first on Bright!Tax Expat Tax Services.

US expats typically have one or more foreign bank accounts to receive their income and facilitate payment of living expenses. For newcomers to the FBAR filing requirement, here’s what you need to know: With a foreign bank account often comes an administrative US reporting obligation: the Foreign Bank Account Report (FBAR). Those subject to the FBAR must file this form annually to report their foreign bank and financial accounts.

To our veteran filers: Welcome back! It’s our pleasure to provide you with the most updated information on the FBAR and its 2023 filing deadline. 

Let’s dive in.

Who’s required to file the Foreign Bank Account Report?

The Internal Revenue Service (IRS) requires you to file an FBAR as an individual taxpayer if you are:

• A citizen, Green Card holder, or resident alien AND
• You have a foreign bank account or any other foreign financial account, AND
• The total combined balance in one or more of your foreign financial accounts exceeds $10,000 at any point during the prior tax year.

Note: Any account that you have signature authority over will be subject to FBAR reporting as well.

Common examples of triggering the FBAR filing requirement 

The situation: Jason is a US expat living in South Korea with just one non-US bank account: a checking account with a South Korean bank. Last November, his account had a balance of $11,000 when he was paid his annual bonus. He then immediately used the bonus to pay for a family vacation. 

The result: Even though he has just $8,500 in it right now, he still must file an FBAR, as his account briefly exceeded the $10,000 threshold during the tax year.

The situation: Victoria is a US expat. She currently lives and works in South Korea, but she has previously lived and worked in Canada. She has one brokerage account in Canada and one checking account in South Korea. 

In this scenario, she needs to look carefully at their combined total balances. Let’s say that her Canadian brokerage account had a $6,000 balance last December. Also, in December, the balance in her Korean checking account hit $4,500. 

The result: Since the maximum value of both accounts totaled $10,500, Victoria must also file the FBAR, even though no one foreign account individually held over $10,000.

Exceptions to FBAR filing

There are some exceptions that prevent taxpayers from having to file an FBAR, even if they fit the criteria described above. You do not need to complete the FBAR filing if:

• A US military financial institution manages your foreign bank account
• You have a correspondent or Nostro foreign bank account
• A government entity owns your foreign bank account
• Your foreign bank account is a US-based IRA (Individual Retirement Account) or another qualified retirement account containing foreign accounts as part of a pooled fund, and you are the owner or beneficiary
• Your foreign bank account is part of a trust of which you are a beneficiary
• Among married couples, only one spouse may need to file an FBAR (more details on that below)

Jointly-filed FBARs & FinCen Form 114a?

As mentioned above, some married couples may only need to file one FBAR, provided that a) the couple holds jointly-owned foreign accounts and b) only one or none of the spouses own a separate account.

Let’s look at an example

Ted and Sasha are a married couple living in Vietnam. The couple jointly owns two accounts in Vietnam: a checking account and a savings account. 

Ted also has a UK-based retirement account from when he lived and worked in Scotland, but has not added Sasha as a co-owner. Sasha owns no other foreign accounts besides the one she jointly holds with her husband. In this case, Ted must file an FBAR, but Sasha does not need to, as her jointly held account will already have been disclosed on Ted’s FBAR.

In order to jointly file this FBAR, you must include along with it FinCEN Form 114a: Record of Authorization to Electronically File FBARs, which allows one spouse to authorize the other to file on their behalf. Note that the filing spouse must report both their individually-owned accounts as well as the full balance of their joint accounts (i.e. 100% of the balance, not just their 50% share).

How does the IRS know if you have a foreign bank account?

The US passed the Foreign Account Tax Compliance Act (FATCA) in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. As of 2014, this law compels all foreign financial institutions (FFIs) to report accounts held by US citizens and expats to the US government. In other words, your foreign bank will report your account to the US. FFIs that do not comply with FATCA could receive fines.

This means if you must file the FBAR but do not, you open yourself up to issues with the US Treasury — including a potential $10,000 penalty for every year of noncompliance.

Given that the FBAR is a reporting obligation vs. a tax obligation — i.e. it doesn’t in itself carry an associated tax liability — it’s in your best financial interest to voluntarily file if you meet the requirements.

Related: FATCA Enforcement: What US Expats Need to Know 

What is the FBAR filing deadline for 2023?

The FBAR deadlines are slightly different from tax return deadlines for expats. Due to an automatic two-month filing extension for Americans abroad, expat tax returns for the 2022 tax year weren’t due until June 15, 2023 — a date that you can extend further upon request to October 16, 2023. However, FBAR filings technically have the same due date as the standard tax return deadline: April 18, 2023.

Don’t panic if you realize you’ve missed this year’s deadline, though. US expats receive an automatic six-month extension for filing the FBAR. This means you still have until October 16, 2023, to file your foreign financial bank account report. The FBAR automatic extension does not require you to proactively submit a request — as long as you file by the October 16th deadline, you will be considered a timely filer. 

Related: FBAR Late-Filing Penalties: What Happens, How to File & More

Online filing for FBAR 

FinCEN form 114 is one of the more straightforward US tax forms to file. It requires that expats enter their personal and contact information, as well as the details for all their foreign accounts.

For each account, expats should enter the:

• Account name
• Account number
• Type of account
• Name and address of the bank or other financial institution where the account is held
• Maximum account balance during the tax year

You should keep records of this information for at least five years after filing.

When entering phone or account numbers, expats should omit all formatting such as spaces, hyphens, or parentheses, and when entering maximum account balances, expats should round them up to the nearest dollar.

Expats should convert non-dollar account balances into USD before entering them on FinCEN form 114 using the Treasury Reporting Rates of Exchange for the last day of the relevant tax year.

Related: FBAR Filing Online in 2023: A Guide for Expats

Cost to file an FBAR

There’s no cost incurred when filing the FBAR. It’s free to file online by yourself. If you use a tax preparation service or CPA, however, they might request a fee to file your FBAR on your behalf.

Filing your FBAR incorrectly or skipping a required FBAR filing could cost you, however, as the US may charge penalties for missing or inaccurate FBARs. To ensure your FBAR is error-free, we recommend working with an experienced CPA with a background in expat taxes who can verify your FBAR and help you file.

How difficult is it to file an FBAR on my own?

The FBAR online filing process is quick and straightforward for most US expats. You’ll simply fill out the form and submit it, making sure to keep any corresponding bank statements for your own records.

If you have a more complicated financial or tax situation, filing the FBAR may take more time. You may need to wait to receive forms from all of your foreign accounts. In this case, you may also prefer to seek professional filing help.

No matter how complex your situation, Bright!Tax can work with you to make sure filing your FBAR is as quick and painless as possible.

Other related filing requirements for US expats

The FBAR is just one of the (oftentimes, many) forms you’ll need to file as a US expat. Another common filing requirement in the same vein as the FBAR is IRS Form 8938, or the Statement of Specified Foreign Financial Assets.

A brief overview of the Statement of Specified Foreign Financial Assets

Expats filing individually who live outside the US and hold foreign assets worth over $200,000 on the last day of the tax year — or over $300,000 at any time during the tax year — typically must file Form 8938. However, the thresholds that trigger mandatory Form 8938 filing do depend on your filing status and your residency location (i.e. whether you lived within or outside of the US during the tax year).

So if you’re a US expat living abroad with a foreign bank account containing $250,000 on the last day of the tax year, you’d have to file both an FBAR and IRS Form 8938. And, since foreign financial institutions are reporting your accounts to the US government, it’s best to file on time to prevent penalties.

Unlike the FBAR, you’ll file IRS Form 8938 along with your tax return itself. This means it was due by June 15, 2023 (unless you requested a tax return extension). If you did receive an extension, it is due by October 16, 2023.

If you meet the FBAR filing requirements, we’ll take care of it.

It can be difficult to understand whether you need to file an FBAR. Depending on how many foreign accounts you need to report, it may also be time-consuming. That’s where we come in – consult a Bright!Tax US expat tax expert today to simplify your FBAR filing.

Get Started

References

1. US Treasury Exchange Rate
2. Are US Foreign and Retirement Accounts FBAR Reportable?
3. American Expats – File Your FBAR (Overview)
4. About Form 8938 (IRS)
5. Do I Need to File Form 8938 (IRS)

The post FBAR Deadline 2023 – Filing Requirements for US Expats appeared first on Bright!Tax Expat Tax Services.

Filing an FBAR every year (if eligible) is one of those requirements. Knowing when and if you’re expected to file this report can help you avoid FBAR penalties. It can also prevent an unwanted dialogue with the US Treasury Department. 

Not sure if you’re required to submit an FBAR filing? Don’t worry. We’ll walk you through the basics of what an FBAR is and help you understand if you’re required to file and when, so you can avoid FBAR penalties.

What is the FBAR?

The FBAR stands for Report of Foreign Bank and Financial Accounts. It’s a form some US expats must submit each year if they hold foreign bank accounts over a certain amount. It’s a separate filing from your US tax returns (which many US expats must also file), and has different requirements and deadlines.

Why are US expats required to file an FBAR? For US taxpayers living and banking in the US, the IRS has immediate access to information about their banking, and therefore income, history. This allows the IRS to keep an eye on any potentially unreported income. On the other hand, for US taxpayers living abroad, the IRS doesn’t have the same visibility and uses the FBAR report as a means to obtain similar oversight. The FBAR captures your foreign bank account information, to ensure you’re paying the appropriate US taxes. It’s primarily required to prevent tax evasion – but not every US expat will need to file one.

If you do need to turn in an FBAR, you’ll fill out and submit FinCEN Form 114 online. The US Financial Crimes Enforcement Network, also known as FinCEN, oversees the electronic FBAR filing process.

Am I required to file an FBAR?

Great question. While nearly all US expats must file US tax returns, FBARs have different qualifications. In general, you need to file the FBAR if you meet these two criteria:

• You have a financial account outside of the United States AND
• This foreign financial account had an account balance of $10,000 or more during any point in the previous year

For example, let’s say you’re a US expat with a bank account in Italy that had $12,000 in the account last September. In this situation, you do need to file an FBAR.

The account balance rule also applies to multiple foreign bank accounts. If the total of your foreign accounts was over $10,000 – say, you had two bank accounts in France with $6,000 in each – then you’re required to file an FBAR this year because you held a total of $12,000 in financial accounts abroad.

You’re required to submit a FBAR for any foreign financial accounts including bank accounts, brokerage accounts, and pension accounts that have more than $10,000 throughout the tax year.

There are a few exceptions to this requirement. If your account is a foreign retirement account, like an IRA, for instance, you may be exempt from filing the FBAR. In addition, if a foreign government owns your foreign bank account or the account is a nostro account, you do not need to file.

Some of the requirements and exemptions for filing your FBAR can be murky, so we recommend chatting with a Bright!Tax CPA if you have any questions. Our CPAs can help you avoid FBAR penalties by finding out if you’re required to file, helping you file on time or helping to catch up if you’re behind.

When is the FBAR deadline?

The FBAR deadline is technically April 15th (this year it was April 18th), but US expats have some breathing room. If you haven’t filed your FBAR yet, you have until October 15th, 2022. This extension is automatic – meaning, you don’t have to file a form or request it – and you won’t incur penalties as long as you file by this date.

Bright!Tax can work with you to make sure you meet the FBAR deadline to avoid penalties. If you need an extension, connect with one of our CPAs to file one ahead of the deadline. 

How does the US government know if you have a foreign bank account?

You may be wondering how likely it is for the US to even find out you have a bank account outside of the country. But it’s actually easier than you might think, thanks to FATCA. The Foreign Account Tax Compliance Act, passed in 2010, requires foreign financial institutions to report accounts of US citizens and expats to the US government. There are steep penalties for foreign financial institutions that do not comply when they trade in US markets.

It’s likely that your foreign financial institution is reporting your bank account to the US government each tax year. That means, the US knows you have a foreign bank account and if you carry a balance of more than $10,000, you’ll need to file a FBAR. Not filing could also result in individual penalties. We recommend getting ahead of any potential penalties by filing on-time. If you’re not sure if you need to file, one of our Bright!Tax CPAs can help.

What are FBAR penalties?

If you owe the US a Foreign Bank Account Report and you do not submit it, the US may charge you penalties. Penalty amounts can vary and often depend on whether you willingly or unwillingly did not file. Typically, the US government charges higher penalties if you willingly fail to file. But, even if you weren’t aware of the filing rules, the US still charges penalties for late or missing FBARs.

Typically, the standard non-willful penalty is $10,000 per missed tax year. Willful penalties can run much higher, costing hundreds of thousands of dollars. But ultimately, the penalty amount depends on your particular case. The good news is, thanks to tax amnesty programs, you can catch up on past-due FBARs, to get proactive and avoid expensive potential penalties.

Tax amnesty programs for filing past-due FBARs

If you suspect you owe the US government an FBAR for a prior filing year, there are tax amnesty programs in place. US expats could avoid penalties and catch up on past-due FBARs through the Streamlined Procedure or the Delinquent FBAR submission procedure.

If you haven’t filed FBARs or tax returns, follow the Streamlined Procedure

The IRS launched the Streamlined Filing Compliance Procedures more than a decade ago to help US expats catch up on their past-due tax returns and FBARs without fear of penalty. Many US citizens traveling the world aren’t even aware they owe the US government tax returns and FBARs. This process makes it easier to come forward and catch up – a win-win for everyone.

The Streamlined Procedure is a tax amnesty program that’s usually best for US expats who are behind on their tax returns. It also allows you to file past-due FBARs.  

Here’s how the Streamlined process works:

First, you must truthfully state that your reason for not filing an FBAR (or tax return) was due to non-willful negligence. In other words: you simply didn’t know you needed to file. Then, you can file up to three past-due tax returns and six FBARs (if applicable) without worrying about penalties and fines. You’ll need to pay any taxes you owe, of course, but you can apply eligible deductions and credits to your tax bill to reduce the total amount you’re on the hook for.

The IRS offers a webinar on how to complete your forms using the Streamlined Procedure that walks you through each step of the process. Bright!Tax can also help you navigate the Streamlined Procedure, while answering questions you have along the way.

Lastly, if the IRS has reached out to you regarding FBAR penalties or missing tax filings or bills, you may no longer qualify for the Streamlined Procedure. In this case, we recommend chatting with a Bright!Tax CPA to discuss the best option for your particular tax situation. 

If you only owe FBARs, follow the Delinquent FBAR Submission Procedure

If your tax returns are up-to-date, but you think you may owe the US government past FBARs, you can avoid penalties through the Delinquent FBAR Submission Procedure. This process is best for US expats who do not need to file past tax returns but do need to submit previous FBARs.

You only qualify for this tax amnesty program if you’re behind on your FBAR filing because of non-willful compliance. This means you did not know you had to file a past dueFBAR. 

To get started, you’ll write a statement explaining why you’re behind on your FBAR filings. Then, you must file any previously owed Reports of Foreign Bank and Financial Accounts online with FinCEN. You can file by mail in some cases, by writing to the Financial Crimes Enforcement Network and requesting a mail-in form. However, filing electronically is easier and typically faster.

You won’t owe any late penalties, as long as your previous tax returns were correct and show you paid US taxes on any income earned and stored in your foreign financial accounts. Bright!Tax can help you navigate the delinquent FBAR submission procedure and file any past due FBARs.

Like the Streamlined Procedure, if FinCEN previously contacted you regarding missed FBAR filings, you may not qualify for this tax amnesty program. Don’t worry. Chat with a Bright!Tax CPA to get advice on the best way to move forward. 

Filing your FBAR to avoid penalties

Whether you’re filing previous FBARs or your 2021 FBAR, the online process is very straightforward. First, you should gather your bank statements and tax paperwork for all foreign accounts qualifying for FBAR filing. Then, you’ll log onto the FinCEN website to file your FBAR. You’ll attach your account paperwork, along with the name on your account, balance information, the account number, and the name and address of the foreign bank.

From there, you’ll sign and submit your form. If you’re married, you can file a joint FBAR for the accounts you and your partner hold. Only one partner needs to submit this consolidated report – though you will both sign this form.

If you have questions or want help filing your FBAR, through one of the tax amnesty programs or the normal process, a Bright!Tax CPA can assist. Reach out today to get started.

Bright!Tax can help prevent FBAR penalties

No one wants to get stuck with penalties or fines for not adhering to tax and other reporting requirements. As a US expat, your reporting requirements are a bit more complicated than typical citizens. Get ahead of the FBAR filing deadline and find out if you’re required to file this year (or for previous years) to prevent filing penalties from accruing.

As a digital nomad, Bright!Tax knows you have a lot on your plate. From travelling to managing your own contract or small business, we know digital nomads work hard. That means, you may not always have the time to handle US reporting on your own. One of our Bright!Tax CPAs can help you better understand your reporting requirements as a US digital nomad. Reach out to us today to learn more and prevent FBAR penalties.

The post Understanding FBAR Penalties appeared first on Bright!Tax Expat Tax Services.

Ensuring adherence to these regulations is key to avoiding substantial penalties, particularly following high-profile 2023 FBAR cases that were decided by the Supreme Court.

Whether you’re filing for the first time or updating your knowledge, this article offers essential insights for compliance with the latest FBAR requirements.

What’s the FBAR deadline 2023?

There are two FBAR deadlines, and both have passed in 2023. The 2023 FBAR deadline was technically on the same day as the deadline for US federal tax returns (April 18th in 2023). For US expats, there is an automatic extension until October 15th, but because that day fell on a Sunday this year, the 2023 FBAR deadline was October 16th.

Is there an FBAR deadline 2023 extension?

If you are filing after the October deadline, you will need to refer to the FinCen website’s Late Filing page for instructions on how to late-file and justify your tardiness.

Zooming out: What is FBAR?

The FBAR filing requirement was originally introduced through the Bank Secrecy Act (BSA) of 1970. The original intent was designed to identify and deter money laundering. But, to identify the bad actors, the government has to look at the FBARs of anyone who meets the filing requirements. This includes many everyday, law-abiding US expats living abroad, and, unfortunately, significant penalties are possible for those subject to file an FBAR but don’t (sometimes even when it’s unwillful).

Related: US Expat Taxes: A 12-Step Guide to Tax Filing Success

Who needs to file an FBAR?

Anyone with $10,000 or more in foreign-registered financial accounts at any point during the calendar year must file an FBAR. This rule applies even if the $10,000 is spread across multiple accounts. 

At this point, it’s natural to wonder: “What exactly is a foreign financial account?”

A financial account is any account with a cash balance registered outside of the US and its territories. This encompasses all bank accounts and most investment accounts, often including foreign pension or retirement plans.

Beyond reporting their own personal accounts, those required to file an FBAR must also report any account they:

• Have signature authority over
• Control (direct or indirect)
• Or any other type of financial interests

This is applicable even if an account isn’t registered in someone’s name. This is often the case for business banks or investment accounts registered in a business or trust’s name (among others).

Fortunately, you can file your FBAR online, and we’ll guide you through the steps below.

How to file FBAR online

Rather than reporting to the IRS, FBARs are reported to the Financial Crimes Enforcement Network (FinCEN). You can securely file the relevant form, FinCEN Report 114, online through the BSA E-Filing System.

How do I file FBAR 2024 online? 

FinCEN form 114 is among the more straightforward US tax forms to file. It requires that expats enter their personal and contact information, as well as the details for all their foreign accounts.

For each account, expats should enter the:

• Account name
• Account number
• Type of account
• Name and address of the bank or other financial institution where the account is held
• Maximum account balance during the tax year

Records of this information should be kept for at least five years after filing.

Calculating the FBAR exchange rate

To calculate the FBAR maximum account value exchange rate, convert non-dollar account balances into dollars before entering them on FinCEN Form 114. This is done using the Treasury Reporting Rates of Exchange for the last day of the relevant tax year.

Can the FBAR deadline be extended?

There are two deadlines associated with FBAR, April 15th and October 15th. For global US taxpayers living overseas, there is an automatic extension until the October deadline.

There is no process for requesting or submitting an FBAR extension. It comes automatically to those who fail to file by the original deadline.

Additional extensions are sometimes granted in very specific scenarios, such as to those who have been impacted by a natural disaster.

Because of the existing six-month extension, though, requests for additional personal extensions are typically not accepted.

What happens if you file an FBAR late?

If you forgot to file an FBAR unintentionally, don’t panic. An amnesty program called the Delinquent FBAR Submission Procedures allows those who accidentally fall behind on their FBARs to catch up with little to no penalty.

To qualify for the Delinquent FBAR Submission Procedures, you must:²

• Have filed late unintentionally (due to confusion or not being aware of the requirements)
• Apply before the IRS reaches out to you regarding late or missing FBARs
• File your last six FBARs (if applicable) and explain why they were late

FBARs filed under the Delinquent FBAR Submission Procedures may be subject to audit, so accuracy is important. If you need to both catch up on US tax and FBAR reporting, you may be a candidate for the IRS Streamlined Filing Procedure amnesty program.

Related: Streamlined Filing Procedure: The 6 Most Frequently Asked Questions

Whare are FBAR penalties for not filing?

Depending on whether or not the violation was willful, you may be subject to steep financial penalties. These start at $10,000 per missing report but can reach as high as $100,000 (or 50% of the account’s value at the time you failed to file — whichever is greater).

In some cases, global US taxpayers have been subject to criminal penalties. The 2023 Supreme Court Case, Bittner v. United States, highlights the draconian fines that are imposed even under decisions that “favor” the defendent.¹

How does the IRS learn about foreign income? 

In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA). This law requires foreign financial institutions to report the account information of any US person to the US government.³

Today, global US taxpayers’ foreign bank account information is made available to the US government. As a result, identifying (and, consequently, prosecuting) non-compliance is easier than ever. This is something worth learning more about when deciding whether to open a foreign bank account.

In sum, staying on top of your FBAR and other tax/reporting obligations has arguably never been more important as a US expat.

Related: 2024 Tax Changes: IRS Updates for US Taxpayers Overseas

Are foreign assets reported on an FinCen 114? FBAR vs FATCA considerations

Those living abroad with foreign financial assets in excess of $200,000 at the end of the calendar year or $300,000 at any time during the year must report them. However, these are not reported on the FBAR, but separately through FATCA Form 8938.

How do I know if I need to file an FBAR?

If you’re still unsure whether you need to file an FBAR or how to do it, you might feel most reassured after speaking with an expat tax professional. Given the hefty penalties and high rate of enforcement, the stakes can feel very high.

But, that’s why we’re here! At Bright!Tax, we’re not just experts in international tax – many on our team are also expats who really get how doing taxes abroad is just one more thing that makes living outside the US a little more challenging. And as expat tax professionals, we want to do everything we can to ease this burden for you so you can get back to enjoying your life abroad.

A Brighter Way to File US Taxes Overseas

Beyond assisting with FBARs, our team helps Americans living abroad file taxes promptly, efficiently, and easily. Often, we can reduce your US tax bill to as little as $0.

Get Started Today!

References:

1. U.S. Supreme Court limits penalties for not reporting foreign accounts
2. IRS Delinquent FBAR Procedures
3. FATCA – IRS

The post FBAR Filing 2024: Clarifying FinCen Form 114 for Expats appeared first on Bright!Tax Expat Tax Services.

FBAR filing requirements – who has to file?

The requirement to file an FBAR applies to all American citizens and green card holders who have over $10,000 in foreign financial accounts at any time in a year.

The $10,000 threshold applies to the individual rather than to any single account, so expats have to add all their foreign account balances together to see if they have to file.

Filing an FBAR means filing FinCEN Form 114 online using the BSA E-Filing System.

FBARs must be filed by each individual who qualifies, even married couples filing jointly (so both holders of a joint account would each report it, assuming both are US taxpayers).

FBARs must be filed by October 15 in the year following the tax year (the current rules state that the deadline is April 15 with an automatic 6 month extension).

FBAR filing requirements – How to file FinCEN Form 114

FinCEN Form 114 is an online form. It asks you to provide details relating to all of your foreign registered bank and investment accounts. The details you have to provide for each account are the name and address of the bank or financial institution where the account is held, the account name and number, what type of account it is, and the maximum balance during the year. Alternatively, your US expat tax preparer can file your FBAR along with your federal tax return.

All American citizens are required to file US taxes too, even if they live abroad. Those who haven’t been filing their US tax return as well as their FBARs can usually catch up without facing penalties by using an IRS amnesty program called the Streamlined Procedure. Those who have been filing their US taxes but not their FBARs meanwhile can use another amnesty program called the Delinquent FBAR Submission Procedures.

Everyone’s situation is different, and for Americans living abroad the most beneficial way to file depends on many factors, including what country they live in, their income sources and levels, and their personal and family circumstances, so it’s always worth seeking advice from an expat tax specialist.

The post FBAR Filing Requirements for Americans Living Abroad appeared first on Bright!Tax Expat Tax Services.

Firstly, it’s often difficult to find detailed but digestible information on the topic, including whether or not you need to file an FBAR. If you rev the search engine and start digging in beyond the filing requirements, alarming information about FBAR penalties can quickly surface.

It’s important to note that the vast majority of FBAR violations are non-willful. This means that the FBAR amnesty program is an option for many US taxpayers facing fines for non-compliance.

That said, FBAR penalties can be steep, and it’s important to be aware of the latest information around filing requirements so that you can rectify your situation in the most timely and cost-efficient manner possible if you find yourself facing an FBAR penalty.

In the following article, we’ll break down how to understand FBAR penalties in the context of what an FBAR is and whether FBAR penalties apply per account. We’ll also review how to file an FBAR, discuss options for how to file FBARs for previous years, and more.

What is an FBAR?

The FBAR is an annual report submitted by US taxpayers to the Financial Crimes and Enforcement Network (FinCEN). Its submission serves the administrative purpose of registering all foreign bank accounts held (fully or jointly) by an American taxpayer with FinCEN.

Do all US taxpayers with foreign accounts need to file an FBAR?

No. The FBAR filing requirement applies to any American with over $10,000 in foreign accounts at any point in a given tax year. This threshold may be crossed by holding $10,000 in a single foreign account, or when the sum of holdings in different foreign bank accounts held by the US taxpayer equal $10,000 or more.

If you have only one foreign financial account and the account never contains more than $9,999.99, then you do not need to file an FBAR. Similarly, if you hold multiple foreign financial accounts and the sum of those holdings results in a number below $10,000, then you are exempt from filing an FBAR.

A foreign account includes the following: foreign bank accounts, pensions, and certain foreign investment accounts.

Note that the $10,000 minimum is per person, not per account. So, someone with ten offshore financial accounts each containing $1,001 dollars at any given point in a tax year would exceed the threshold with $10,010 in total offshore accounts. Therefore, they would be obligated to report those accounts.

For many US expats — especially those who hold or exercise control over multiple accounts — it can be confusing to determine whether or not they are subject to FBAR reporting requirements.

Although this is stressful and frustrating, typically a quick call to your US expat tax-specialized CPA can provide you with clarity.

2023 FBAR filing deadline

For a long time, the FBAR filing deadline for any given tax year was June 30th of the following year. Since 2016, however, the FBAR filing deadline has been aligned with the federal tax return filing deadline of April 15th. Americans abroad, however, are granted a free automatic two-month extension until June 15th for both their tax return and FBAR. 

Note: This extension can also be extended until October 15th upon request. 

FBAR penalties and violations

As mentioned earlier, the FBAR is submitted to the Financial Crime Enforcement Network (FinCEN). As a separate entity from the IRS, FinCEN imposes more severe penalties for FBAR violations than the IRS does for tax return violations. There are several levels of penalties, depending on whether someone’s failure to file or incorrect filing is deemed willful or non-willful.

Non-willful FBAR violations

We really can’t stress this enough: The vast majority of cases where someone failed to file an FBAR or filled it out incorrectly are non-willful. Non-willful failures to report may occur when US expats aren’t aware they met the FBAR reporting threshold, or because they didn’t know about FBAR reporting obligations at all. 

In these cases, FinCEN is a bit more lenient — but not completely forgiving. The lowest-level penalty for non-willful failure to file or incorrect filing is $10,000 for each year that it occurred. This makes even low-level fines prohibitively expensive for many expats.

Willful FBAR violations

If someone’s failure to file or incorrect filing is considered to be willful, the consequences can be much more severe. A couple of circumstances in which somebody might be found to have willfully committed an FBAR violation:

• Someone failed to file an FBAR for one year but filed one in the past — indicating that they were aware of FBAR obligations
• Somebody who didn’t file an FBAR sent emails mentioning the FBAR, again indicating that they were aware of their obligations but intentionally skirted them

The penalty for a willful FBAR violation is $100,000 or 50% of the balance of the account at the time it occurred. A possible prison sentence may also apply.

2023 SCOTUS ruling on FBAR penalties, and what it means for late-filers

For many years, FBAR penalties were accrued per unreported account, not per tax year.

This meant that someone with three foreign financial accounts who missed filing FBARs at the non-willful assessment for three years would be fined $10,000 per account per year, for a staggering total of $90,000.

In recent years, however, the assessment of the penalty per account was challenged in courts. Ultimately, a particular case, Bittner v. United States, went all the way to the Supreme Court.

The case asked the judges to conclusively determine whether non-willful penalties should be applied per account or per report. In late February of 2023, they upheld an earlier ruling by the Ninth Circuit Court that FBAR penalties should be applied per FBAR report (which lists all foreign accounts) rather than per account.

Under the final interpretation, the same person who non-willfully missed filing FBARs for three different accounts for three years would have their financial penalty reduced from $10,000 per account per year for a total of $90,000 to $10,000 per year, for a total of $30,000. While still a significant financial penalty to incur for a non-willful violation, this decision is still a win for taxpayers.

Obtaining FBAR amnesty via the Delinquent FBAR Submission Procedures

Technically, there is no FBAR late filing penalty. However, there is a penalty for not filing an FBAR, which you could be hit with if you go long enough without filing. It’s best to err on the side of caution and get your FBARs in on time.

But, what if you made an honest mistake? If you’re searching for information such as “how to file FBAR for previous years,” then the Delinquent FBAR Submission Procedures could be your FBAR lifeline.

Delinquent FBAR Submission Procedures

If you realize that you owe FBARs from years past, don’t panic just yet. There is a program called the Delinquent FBAR Submission Procedures, which helps those who unwittingly fell behind on their FBARs to catch up without additional penalties. In order to qualify, you must:

• not currently be under investigation by the IRS 
• take advantage of the program before the IRS contacts you about missing FBARs. By the time they reach out to you, it’s unfortunately too late to benefit.

Under the program, you must file all outstanding FBARs and include a statement describing why they are being submitted late.

How does the IRS find out if I don’t file an FBAR?

The FBAR was originally introduced in 1970 as part of the Bank Secrecy Act, which was implemented to prevent Americans from evading taxes by hiding their wealth abroad. For decades, however, it wasn’t always easy for the government to enforce it, as obtaining Americans’ account information from foreign institutions posed a challenge.

That largely changed when the Foreign Account Tax Compliance Act (FATCA) was passed in 2010, later coming into effect in 2014. Under FATCA, all foreign financial institutions must report information on American account holders to the US government, making it much easier for them to monitor expats’ foreign accounts and enforce FBAR penalties if warranted.

Related: FATCA – Everything Expats Need to Know

Catching up on US taxes more broadly

If you’re behind on both your federal tax returns and your FBARs, you’ll want to get caught up as soon as possible. Fortunately, you may be able to do so without even incurring any additional penalties thanks to a special program from the IRS. 

Streamlined Filing Procedures

The Streamlined Procedures is an amnesty program that helps people who weren’t aware of their filing obligations to catch up on past filings (both for tax returns and FBARs) and pay any back taxes owed without facing penalties.

Just as with the Delinquent FBAR Submission Procedures, you must not be currently under IRS investigation and take advantage of the program before the IRS reaches out to you regarding overdue filings. Under the Streamlined Procedure, all you need to do is file your last three returns and last six FBARs (if applicable) and self-certify that your prior non-compliance was non-willful.

Confidently file US tax returns, including FBARs, with Bright!Tax.

It's not uncommon for expats to have doubts about their tax and financial reporting obligations. If you want to embark on the Delinquent FBAR Submission Procedures or need to catch up on your US tax filing, don’t hesitate to contact the team at Bright!Tax.

Meet Your US Expat Tax Expert

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The statement read: “FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account.”

FinCEN is the American financial crimes authority. It has a global reach, and it already requires Americans (including expats) with foreign registered financial accounts to report them annually by filing a Foreign Bank Account Report, or FBAR.

What is FBAR reporting?

The US tax system requires all American citizens (and Green Card holders) who meet minimum income thresholds to file US federal taxes every year, including those living abroad.

Minimum income thresholds for 2020 were $12,400 of any income for individuals ($24,800 for married couples), or $500 of self-employment income, or just $5 of any income for Americans married filing separately with a foreign spouse.

The FBAR filing requirement is triggered if an American taxpayer has a total of over $10,000 in foreign registered financial accounts at any time in the year. The $10,000 threshold relates to the taxpayer, not individual accounts.

How should virtual currencies be reported currently?

Previous guidance relating to reporting Bitcoin and other cryptocurrencies from late 2019 advised that they don’t need to be reported in FBARs, so the new statement is a departure from previous reporting guidelines.

Currently, virtual currencies received by Americans received in exchange for providing a service should be reported as income (and 2020 Form 1040 has a new field asking this question), while gains made on the sale of cryptos can qualify towards capital gains tax calculations.

When will the change take place?

The FinCEN statement on December 31st 2020 declared an intention to amend the FBAR reporting rules, rather it being an immediate change.

The announcement of the proposed change comes shortly after another announcement requiring virtual currency exchanges to report American account holders, however it’s unclear how this will be enforced abroad (where foreign banks and investment firms already do this, enforced by the FATCA law).

The most likely timetable for the proposed change is that the details will be worked out and announced in 2021 and be applied to the 2021 tax year for filing in 2022.

Catching up

Americans who are behind with their US tax filing and FBAR reporting from abroad because they weren’t aware of the rules can normally catch up without facing penalties or back taxes under an IRS amnesty program called the Streamlined Procedure.

The post IRS Announces Cryptocurrency Accounts to be Added to FBAR Reporting appeared first on Bright!Tax Expat Tax Services.

This is because the US taxes based on US citizenship, rather than on residence.

When Americans abroad file their US taxes, by filing additional forms they can claim IRS provisions such as the Foreign Tax Credit and the Foreign Earned Income Exclusion to help them pay less US tax and avoid double taxation.

Americans with foreign financial accounts may also have to report them by filing an FBAR in 2021.

What is an FBAR?

An FBAR is a Foreign Bank Account Report. The requirement to file an FBAR was introduced back in 1970, however for many years most Americans living abroad lived safely in ignorant bliss of FBAR filing requirement, as Uncle Sam had no way of enforcing it.

Foreign financial accounts include all bank and investment accounts, and most foreign pension accounts.

Furthermore, any account that an American has signatory authority or any other form of indirect control over qualifies, even if it isn’t registered in their name.

It’s important to note that the $10,000 threshold is per US taxpayer, counting all of their qualifying foreign accounts, rather than referring to any single account.

How do you file an FBAR in 2021?

FBARs are filed to FinCEN, the US Financial Crimes Enforcement Network, online, through the BSA E-Filing System. The FBAR form is called FinCEN Form 114.

The FBAR form requests the name and address of each financial institution (such as a bank or investment firm) where an account is held, along with the account name, number, and the maximum balance in the year.

Americans can file FBARs themselves, but many ask their expat tax return preparer to file it on their behalf.

Thankfully, there are amnesty programs available for Americans who haven’t been filing because they weren’t aware of the requirement to. It should be noted that these amnesty programs are voluntary, which is to say that they are only accessible before or until the IRS gets in touch.

Americans who have been filing a federal tax return from abroad but not FBARs can catch up by utilizing the Delinquent FBAR Submission Procedures. Expats who haven’t been filing federal tax returns or FBARs can catch up using the Streamlined Procedures program. Both of these programs allow qualifying Americans, including expats, to avoid penalties and back taxes.

If you have any questions about your US tax filing or FBAR reporting from abroad, don’t hesitate to get in touch – we can help.

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