Aggregate Balance for FBAR Requirement
Aggregate Balance for FBAR Requirement: The FBAR is used to report foreign bank and financial accounts to FinCEN. The technical name of the form is FinCEN Form 114. The FBAR is required to be filed by US persons (not limited to individuals) in any year(s) the filer meets the threshold filing requirements. The FBAR form is filed electronically, and is not limited to bank accounts — it includes Foreign Bank and Financial Account. One major source of confusion – understandably so – is for filers just trying to determine what the threshold filing requirements are for reporting the FBAR form each year — and which accounts are included on the form.
Let’s briefly review what the more than $10,000 in annual aggregate total means when it comes to the aggregate balance for FBAR requirement.
Aggregate Balance for FBAR Requirement & FBAR Threshold
When the FBAR threshold refers to reporting foreign accounts, it is not referring to the threshold for each account. Rather, in order to meet the FBAR filing theshold, the filer must have more than $10,000 in annual aggregate total of ALL foreign financial accounts. For example, if Janine has one account with $800,000 in it — then Janine is required to file the FBAR, unless an exception, exclusion or limitation applies.
In addition, Janine’s friend Denise has eight accounts which each have around $8,000.
Does Denise have to file the FBAR even though none of her individual accounts exceed $10,000?
Per Account Value for FBAR
The purpose of the FBAR is to provide the US government with a snapshot of what certain values are in foreign accounts. In order to achieve this,. the US government requires account holders to report maximum account balance is in each account. And, if the total value of the maximum balances combined exceeds $10,000, then the taxpayer is required to file the form — even if none of the individual accounts exceed $10,000.
FBAR Threshold Requires Full Reporting
Once the US person with foreign accounts exceeds the $10,000 threshold, they are required to report all of their open accounts on the FBAR. This includes accounts which are not active, accounts which do not generate any income, and accounts which may be considered dormant or “sleeping.”
In addition, financial accounts includes much more than just bank accounts. If you have certain foreign pension, investment accounts, or life insurance with a cash or surrender value — you are required to disclose this information as well.
If you are out of compliance for FBAR in the current or prior years, you may consider speaking with a Board-Certified Tax Attorney Specialist to get the lay of the land when it comes to offshore disclosure and understand what your different options are –and what the different FBAR amnesty programs require.
In conclusion, when you have foreogn financial accounts, it is important to note that you may have an FBAR Filing requirement depending on annual aggregate total of all of your foreign accounts combined. The more than $10,000 threshold is not based on an individual per account basis, but rather the total value of the maximum balances of all of your foreign accounts combined.
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