- 1 Who Should File the FBAR?
- 2 US Citizen Living in the US or Abroad
- 3 Lawful Permanent Resident in the US or Overseas
- 4 Lawful Permanent Resident Treaty Election
- 5 US Business with Foreign Accounts
- 6 US Estate with Foreign Accounts
- 7 Missed FBAR Filings in Prior Years
- 8 About Our International Tax Law Firm
Who Should File the FBAR?
The FBAR refers to Foreign Bank and Financial Account Reporting on FinCEN Form 114. Unlike many of the other international information reporting forms that are required of taxpayers who have foreign accounts and assets, the FBAR is not a tax form and therefore is not directly correlated with having to file a US tax return. In other words, while a taxpayer may not have to file a tax return, since they are considered a US person, they are still required to file the annual FBAR.
Let’s look at five examples of who should file the FBAR.
US Citizen Living in the US or Abroad
Mei is a US citizen that lives in the United States and has foreign accounts that exceed the reporting threshold. Therefore, she must file the annual FBAR to report these accounts. Then a few years later, Mei relocates to a foreign country. Despite the fact that she now resides in a foreign country, she is still required to report the FBAR – and the mere fact that she lives outside of the United States does not eliminate the FBAR reporting requirement.
Lawful Permanent Resident in the US or Overseas
The next taxpayer, Henry, is not a citizen of the United States, but rather a Lawful Permanent Resident. Henry has accounts that are located outside of the United States and even though he is not a US citizen (but rather a citizen of another country and a Lawful Permanent Resident of the United States) does not change the fact that he is still required to report his foreign accounts. He has the same requirements as a US citizen even if he moves outside of the United States because as an LPR, he is still required to file the FBAR. But, what if he makes a “treaty election?”
Lawful Permanent Resident Treaty Election
Expanding upon the lawful permanent resident example above, once Henry moves overseas, he decides to make a treaty election to be treated as a foreign person and not a US person for tax purposes. Let’s presume that he is in a treaty country and meets the requirements to qualify for making a treaty election with Form 8833. While it may eliminate his requirement to file a Form 8938 (since Form 1040 may not be required), it does NOT eliminate the FBAR filing requirement. The IRS has made clear that if a US person moves overseas and then makes a treaty election to be treated as a foreign person, they are still required to file the FBAR. As provided by FBAR Publication 5569:
“Example: Kyle is a permanent legal resident of the U.S. Kyle is a citizen of the United Kingdom. Under a tax treaty, Kyle is a tax resident of the United Kingdom and elects to be taxed as a resident of the United Kingdom. Kyle is a U.S. person for FBAR purposes. Tax treaties with the U.S. do not affect FBAR filing obligations.”
US Business with Foreign Accounts
FBAR filers are not limited to individuals. Domestic corporations and other entities are also required to report their foreign accounts as well if they meet the threshold for filing. When it comes to employees of the entity who may have signature authority over the foreign accounts of the business — there are some exceptions, limitations, and exclusions to having to file FBAR, depending on the circumstances.
US Estate with Foreign Accounts
Let’s say a taxpayer passes away and the beneficiaries learned that the decedent had foreign accounts. There could be multiple filing requirements at issue — for both the decedent on their final tax return, along with the estate going forward. If the estate determines that the decedent did not properly report their foreign accounts in prior years, they will want to consider one of the disclosure programs before filing the current year.
Missed FBAR Filings in Prior Years
If you miss the FBAR filing requirements in one or more previous years, you should be cautious before filing in the current year so that you do not inadvertently make a quiet disclosure. The Internal Revenue Service has developed several programs to safely assist taxpayers with getting into compliance. Taxpayers unsure of how to move forward should consider speaking with a Board-Certified Tax Law Specialist who specializes in these types of offshore disclosure matters in order to get a good lay of the land before filing.
About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically, IRS offshore disclosure.
Contact our firm today for assistance.