- 1 FBAR Filing Requirements
- 2 Which Foreign Accounts are Reportable
- 3 Foreign Bank Accounts
- 4 Foreign Investment Accounts
- 5 Foreign Stock Certificates
- 6 Foreign Pension Plans
- 7 Foreign Mutual Funds
- 8 Common International Tax Forms
- 9 FBAR Due Date and Extension
- 10 Form 8938 Due Date and Extension
- 11 Form 3520 Due Date and Extension
- 12 Form 3520-A Due Date and Extension
- 13 Form 5471 Due Date and Extension
- 14 Current Year vs Prior Year Non-Compliance
- 15 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 16 Need Help Finding an Experienced Offshore Tax Attorney?
- 17 Golding & Golding: About Our International Tax Law Firm
FBAR Filing Requirements
FBAR Filing Requirements: The FBAR is the Foreign Bank and Financial Account form FinCEN Form 114. The Form is required to be filed for any individual who is a U.S. Person and meets the threshold requirements for filing. The FBAR Requirements for Filing kick in when a U.S. Person has foreign accounts, and the annual aggregate total of the accounts combined, exceeds more than $10,000 on any day of the year. It is not a $10,000 per account requirement, but rather the total aggregate value of all accounts. Even “zero balance accounts” and “dormant or inactive accounts” have to be included. In recent years, the IRS has taken a very aggressive approach toward foreign account and asset compliance. The failure to timely report the form may result in FBAR penalties — but these may be avoided, reduced, or eliminated through FBAR Amnesty/voluntary disclosure.
Which Foreign Accounts are Reportable
Here are some of the more common types of reportable foreign accounts
Foreign Bank Accounts
Bob is a US person who has foreign bank accounts in several foreign countries, with the total value of the foreign bank accounts at around $300,000. Several of the accounts have less than $10,000 and are dormant and/or inactive. In this type of situation, since the total value of foreign accounts exceeds $10,000 for the year, all the accounts are reportable on the FBAR — even if they are below $10,000 and even if they are dormant.
Foreign Investment Accounts
Linda is a permanent resident who previously lived in a foreign country and still maintains many of her overseas accounts. The accounts are not bank accounts but rather investment accounts similar to a Vanguard or E*TRADE account in the United States. The assets are not taxable in the foreign country, and the accounts are comprised primarily of stock and mutual funds. In this type of situation, Linda must report the foreign investment accounts on her annual FBAR. Since the stock and mutual funds are in accounts, she does not typically have to parse out each stock/fund but instead, she can gross up the value of the accounts for FBAR purposes. She may have a separate requirement for reporting the individual foreign funds as well.
Foreign Stock Certificates
Louise has ownership of various foreign stock certificates. The stock certificates are not located in foreign accounts. Instead, she inherited them several years ago and in total, she has ownership of nine different stocks worth $2 million. Louise does not have to report the foreign stock certificates on the FBAR, because she owns the stock certificates individually and they are not located in a foreign account. Louise would still have to report the certificates for FATCA on Form 8938.
Foreign Pension Plans
Tina is a US citizen who worked in various countries in her lifetime. She has retirement plans in the United Kingdom (SIPP), Singapore (CPF), and Australia (Superannuation). Since the foreign pension plans are considered accounts, they are included in the annual FBAR. This is distinct from the rule that if a person has an IRA or 401(k) in the United States that holds foreign accounts in it, those foreign accounts are generally not parsed out and reported on the FBAR. But, foreign pension plans are generally included on the annual FBAR. The US Tax treatment of these accounts will vary.
Foreign Mutual Funds
Gene is an astute investor. When the market was down, he acquired various foreign ETFs and foreign mutual funds in different countries and those funds have increased in value significantly. Gene holds the funds in a single investment account. For FBAR purposes, Gene will report the account with the total different funds. But, since the total value of the funds exceeds $25,000 (Gene is still single), he will most likely have to parse out the different funds on individual form 8621s when filing his tax returns. Remember, the FBAR is a separate form from your tax return. And, since some of these funds issued large dividends for the first time this year (and he was not properly advised to make an MTM or QEF election in prior years), he may have a very complicated tax return in the coming year.
Common International Tax Forms
There are many different types of tax forms that may be required to report your foreign bank accounts. It is important to note that not all foreign account filing forms have the same deadlines and due dates — and the process for seeking an extension will vary depending on the type of form. Let’s look at six important facts about foreign account filing deadlines.
FBAR Due Date and Extension
The FBAR is used to report foreign bank and financial accounts to the US Government. The Form is due on April 15, but is currently on automatic extension. Therefore, if you did not file the FBAR (FinCEN Form 114) by April 15, you still have until October to file it. And, you do not have to file an extension form such as Form 4868 or 7004 to obtain the FBAR extension — because the extension is automatically granted.
Form 8938 Due Date and Extension
Form 8938 is used to report foreign assets to the IRS in accordance with FATCA (Foreign Account Tax Compliance Act). It is similar (but not identical) to the FBAR. Form 8938 is filed with your tax return and is due when your tax return is due. If you are an individual filing a Form 1040, then the form 8938 would be due in April along with your 1040 tax return — but if you extend the time to file your tax return, then your Form 8938 will go on extension as well.
Form 3520 Due Date and Extension
Form 3520 is used to report foreign gifts and foreign trust information. The due date for Form 3520 is generally April 15, but taxpayers can obtain an extension to file Form 3520 by filing an extension to file their tax return for that year. Similar to Form 8938, there is no specific Form 3520 extension form required beyond requesting an extension of the underlying tax return.
Form 3520-A Due Date and Extension
Form 3520-A is used to report US ownership of a Foreign Trust. Unlike Form 3520, Form 3520–A is usually due in March and not April. In addition, the rules for filing an extension for Form 3520-A are different as well (subject to the substitute filing rules). In order to extend the due date to file Form 3520-A, the taxpayer must file a separate Form 7004 extension form.
Form 5471 Due Date and Extension
Form 5471 is used to report the ownership of certain foreign corporations. The filing date is the same as when a person’s tax return is due — and if the taxpayer files an extension for the underlying tax return, Form 5471 will go on extension as well. In recent years, Form 5471 has become infinitely more complex — so taxpayers should be cognizant of the different filing requirements and plan accordingly.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.