Guidelines for Foreign Bank Account Reporting
Do you have any kind of financial interest, or a financial account, over which you have a signature authority in a foreign country? If the financial account or interest is in a bank account, mutual fund, brokerage account, investment account, life insurance etc, or in a combination of different accounts, and the combined value of your holdings exceeds $ 10,000 at any point in time during a reported year, you are absolutely required to report those accounts yearly to the Department of Treasury. This is in accordance with the rules laid by the Bank Secrecy Act.
To report the foreign accounts, you have to fill out a Financial Crimes Enforcement Network Form i.e. FCEN Form 114, which was formerly known as Treasury Department Form 90-22.1. The Financial Crimes Enforcement Network requires individuals to file the details of their foreign accounts electronically through its website.
US citizens, US Expats, US residents, and all US entities that are created under the laws of the US, are classified as US persons and are required to report their foreign bank accounts, if their combined threshold bypasses $10,000 at any time throughout the year. Even if you are not the direct owner of such accounts, but just have signatory authority, or the right to conduct transactions, you have an obligation to fill the FCEN Form 114. Moreover, US persons possessing foreign accounts with even non-monetary assets, such as a life insurance policy worth more than $10,000, are also required to file a Foreign Bank Account Report.
The due date for electronically filing a FBAR Form i.e. FCEN Form 114 is June 30th each year. There is no extension to the due date. Hence, all returns must be completely filed to the FBAR.
The IRS currently has an offshore voluntary disclosure initiative in action, which allows all those persons who absolutely need to file late foreign bank accounts, and have to make amends to the previously reported foreign income. However, the program has stern requirements, thus, it is important to consider it carefully and consult professionals in the field before applying for this program.
If a person fails to file a foreign bank account report by the due date, the penalty can amount up to $10,000. In case the IRS finds that a person willfully didn’t disclose the foreign accounts, or didn’t file the FCEN Form 114, then the penalty can go up to a maximum limit of $100,000, or can make up to 50% of the amount that you hold in a foreign account. Hence, it is wise to start preparing to file the form on time and report all the foreign accounts if their balance amasses over $10,000.
All those persons who jointly file the foreign bank account report with their spouses, or through the help of professional agencies, must consider filling out the FCEN Form 114(a). However, this submission isn’t usually necessary to the FCEN or the IRS.
In addition, you must remember that you definitely have to report your foreign financial accounts worth more than a sum value of $10,000, even if those accounts do not produce any taxable income.
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