Are Expats Required to File FBAR?
A US Expat is a Person who resides outside of the United States. Unlike an expatriate — who has formally relinquished their Green Card or renounced their US Citizenship — a US expat is still considered a US Person even if they reside overseas. That means that the Expat is still required to file a Tax Return — along with the annual FBAR (Foreign Bank and Financial Account Reporting Form) on FinCEN Form 114. The FBAR is one of several international annually filed international information reporting forms used to disclose offshore accounts, assets and investments to the US Government. If the Expat is married to a foreign spouse who is considered a nonresident alien, then the foreign spouse generally does not have to file the FBAR — even if an election is made to file their tax return together — since that requirement does not generally extend to FBAR, although it may extend to Form 8938 requirements. It is important to note that if the account is a joint account with the US Expat, then the Expat may have to identify the spouse as the joint account holder on the FBAR. Lets go through the basics of the Expat FBAR filing requirements and when Expats file FBAR.
Important Facts About Expats Filing FBAR
Questions about the FBAR can go on indefinitely — there is just that much to know.
Here are 10 of the more common questions we receive:
What is FBAR (FinCEN Form 114)?
The FBAR is an electronic form used in accordance with Title 31 (AML: Anti-Money Laundering).
The form was first introduced 50-years ago to help the U.S. Government track foreign accounts.
As provided by the IRS:
“FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, that must be filed with the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the Treasury Department.
The form must be filed electronically and is only available online through the BSA E-FilingSystem website…The FBAR filing requirement is not part of filing a tax return.
The FBAR Form 114 is filed separately and directly with FinCEN….FBAR filings have surged in recent years, according to data from FinCEN…”
Who Has to File the FBAR?
Any person who meets the threshold for filing an FBAR may have to file, including Expats. The threshold is “if the annual aggregate total of foreign accounts exceeds more than $10,000 on any day of the year.”
Also, it is more than just individuals who have to file the FBAR; it also includes:
A few key takeaways:
It is not $10,000 per account, but rather an annual aggregate total
It includes joint and signature authority accounts.
It is required even if the person does not have a tax return filing requirement.
It doesn’t matter if the account pre-dates becoming a U.S. person
Do Individuals File FBAR?
Yes, Individuals file an annual FBAR.
Do Entities File FBAR?
Yep, entities file the FBAR too.
What About Minors, do they File FBAR?
Yes. There is no minor’s exception to filing the FBAR.
How about Trust and Estates, Do they File FBAR Too?
Yes, there is no exception for Trusts and Estates either.
What is the FBAR Filing Due Date?
The FBAR is due in April, but is on automatic extension through October. (this may change in the future).
What’s the FBAR Filing Threshold?
If a Person has an annual aggregate total across all accounts (not per account total) that exceeds more than $10,000 on any given day of the year, the FBAR reporting rules kick-in and the form must be filed. The +$10,000 is not a per account requirement, but rather +$10,000 in total for all accounts combined.
Which Foreign Accounts are Reported on FBAR?
All different types of accounts are FBAR reportable. The FBAR requires you report the majority of foreign bank and financial accounts. It is important to note it is not limited to just bank accounts.
It may also include:
- Investment Accounts
- Pension Accounts
- Stock Accounts
- Life Insurance
How do I File the FBAR?
Individuals can go to the FinCEN.org website, download the PDF, save it to their computer, and submit directly from the form itself.
Need Help with FBAR Instructions?
We don’t know why they make it so hard, but we have prepared our own set of FBAR Instructions as 10-step guide to try to help you understand the requirements for filing.
Are there Late FBAR Penalties?
Yes, but there are FBAR Amnesty programs to assist you. Beware of attorneys trying to scare you. Always be careful of self-purported “FBAR Experts.”
What are the FBAR Penalties?
The FBAR Penalties range extensively. Some people get away with a warning letter in lieu of penalties. Others can get hit with willfulness penalties, BUT most people are non-willful, and those penalties are more limited. It is extremely rare for an FBAR violation to turn criminal.
Can I Avoid FBAR Penalties?
You may be able to avoid or limit penalties. FBAR Amnesty is an approved method for safely getting into compliance. Many taxpayers can reduce or even avoid penalties altogether. Please beware of any tax professional that recommends a quiet disclosure — those are illegal and may result in an IRS Special Agent Investigation (read: not good)
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.