Business Foreign Accounts & FBAR
Business Foreign Accounts: One common misconception is that only U.S. person individuals file the FBAR. In fact, Individuals, Estates, Trust, and entities file FBAR too. In some situations, an individual may have multiple disclosure requirements. For example, they may have individual accounts, along with accounts for their small business – and accounts as an employee with signature authority for a business.
Here are a few quick common scenarios involving FBAR compliance for entities, corporate accounts & employees.
Business-Owned Foreign Accounts
When a U.S. business or certain foreign businesses with U.S. shareholders that or otherwise considered a U.S. person has foreign accounts, the company must report the accounts.
31 CFR § 1010.350 – Reports of Foreign Financial Accounts
The FBAR is handled under title 31 and not the IRS code title 26. As provided by CFR 1010.350:
“1010.350 Reports of foreign financial accounts.
(a) In general.
Each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country shall report such relationship to the Commissioner of Internal Revenue for each year in which such relationship exists and shall provide such information as shall be specified in a reporting form prescribed under 31 U.S.C. 5314 to be filed by such persons. The form prescribed under section 5314 is the Report of Foreign Bank and Financial Accounts (TD-F 90-22.1), or any successor form. See paragraphs (g)(1) and (g)(2) of this section for a special rule for persons with a financial interest in 25 or more accounts, or signature or other authority over 25 or more accounts.
(b) United States person.
For purposes of this section, the term “United States person” means –
(1) A citizen of the United States;
(2) A resident of the United States. A resident of the United States is an individual who is a resident alien under 26 U.S.C. 7701(b) and the regulations thereunder but using the definition of “United States” provided in 31 CFR 1010.100(h) rather than the definition of “United States” in 26 CFR 301.7701(b)-1(c)(2)(ii); and
(3) An entity, including but not limited to, a corporation, partnership, trust, or limited liability company created, organized, or formed under the laws of the United States, any State, the District of Columbia, the Territories and Insular Possessions of the United States, or the Indian Tribes.”
Therefore, if a US Person has foreign interest in a Corporation, Partnership or other entity, the entity must file the FBAR.
Small Business Owner/Consultant & FBAR Compliance for “Entities”
In a common situation, a U.S. person individual may be conducting business on a global scale. In order to collect payments abroad, the individual may open multiple bank accounts in different countries to collect local currency in each country.
Even if the accounts are associated with the small business only and no income per se is generated in the accounts — the accounts are still reportable on the FBAR.
*It also includes disregarded entities.
Employee with Signature Authority on Business Account
When a company has to conduct business overseas and open foreign accounts, someone has to sign the checks, right? When an employee of the company has signature authority, they still must file the annual FBAR to report the signature authority – even though they (usually) do not own any of the money.
In conclusion, the FBAR is reported by US Persons who meet the threshold for reporting. U.S. Person is much more encompassing than just individuals, and can include corporation, partnerships and entities. If you missed reporting, you may qualify for FBAR Amnesty to go back and file FBAR for corporations, corporate accounts and employees with signature authority.
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