Should you be filing the FBAR Form 114?

Every United States person or entity, who has one or more foreign assets or bank account may be required to file the FBAR form with the US Treasury Department. Determine if you are required to file the FBAR.

What is FBAR?

FBAR stands for Foreign Bank and Financial Accounts, FinCEN Form 114. It is used to report a financial interest in or signature authority over a foreign financial account.

You must make this disclosure two times, once in your tax return AND also by filing a Financial Crimes Enforcement Network (FinCEN) Form 114 (“Report of Foreign Bank and Financial Accounts (FBAR)”).

The 2014 Form 114 must be electronically filed and received by the Department of the Treasury on or before June 30, 2015, and cannot be extended. Even if your 1040 is extended to October 15th, the FBAR is still due June 30th, 2015.

The FBAR Form 114 must be filed electronically through http://bsaefiling.fincen.treas.gov/main.html.

The penalty for failing to file Form 114 is substantial — up to $10,000 per violation (or the greater of $100,000 or 50% of the balance in an account if the failure is willful).

Who needs to file FBAR?

Every “U.S. person or entity” who has a financial interest in or signature authority over a foreign financial account exceeding certain thresholds.

To determine every “U.S. person or entity” click here

Every “U.S. person” includes U.S. citizens; U.S. residents; Every “U.S. entities”, including but not limited to, corporations, partnerships, or LLC companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

You need to file the disclosure in your tax return and then separately in Form 114, if during the year:

  1. You had a financial interest in or signature authority over at least one foreign financial account (which can be anything from a securities, brokerage, mutual fund, savings, demand, checking, deposit, or time deposit account to commodity futures or options, and a whole life insurance or a cash value annuity policy).
  2. The aggregate value of all such foreign financial accounts exceeded $10,000 at any time during 2014.

If you did not file the disclosure in your past tax returns (usually on Schedule B and maybe Form 8938. You may need to amend your 1040, call us, we can help guide you or we can make the disclosures for you.

What if you never made the disclosures or report filings –no one ever told you, do you need to start now? Do you need to go back and filed past due years?

Certainly don’t make your situation worse; going forward you should start filing all the required disclosures Schedule B, Form 8938, and FBAR Form 114.

For perspective, think of it like the rules of the road if you’ve been speeding and running red lights, just because you haven’t been caught, doesn’t make it okay or a good idea to continue breaking the law. Just because you haven’t been caught yet for past years unfiled FBAR disclosures, does not mean you are not in some database that has already been turned over to the US Treasury. IRS computers are methodically scrubbing the data and matching it up with US Citizens and long term US residents – this is a big money maker for the IRS and they are unsympathetic to those they catch.

April 30th 2015 was a milestone for Foreign Financial Institutions to be registered and data compliant with testing of automated U.S. Person Account data sharing with the IRS. If you are a U.S. Resident or Citizen, you should expect your foreign institution to be sharing your account information and the IRS to be looking to match this data with your disclosure. If your disclosures are missing, expect to be contacted and pay penalties.

Contact us and we can explain your options. It is far better to be in control of the process prospectively rather having the IRS in driver’s seat assessing 50% penalties for each account balance for each unreported year.

Give us a call if you have any questions or if you would like us to prepare and file Form 114 for you.

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