In the simplest of terms, FBAR is a report to the US Treasury without direct tax implications. However US persons who do not report are subject to substantial penalties for non-reporting.
Any US Citizen, Resident or person doing business in the United States who has an ownership interest in, or signatory authority over a financial account(s) in a foreign country with an aggregate value in excess of $10,000 at any time during the calendar year must file electronically with Financial Crimes Enforcement Network, commonly called FinCEN. Form 114: Report of Foreign Bank and Financial Accounts” (FBAR). Information regarding the account(s) is filed by June 30. Failure to file a FBAR by deadline can result in $10,000 minimum late fee.
Congress has legislated severe Civil and Criminal Penalties for failure to complete FBAR. The IRS examines for FBAR Compliance and Accesses FBAR penalties under a delegation of FinCEN. Regulations governing FBAR are in Title 31 Chapter 10, last published in 2011.
FBAR Electronic Filing
FinCEN Form 114 replaces TD F 90-22.1 – the paper form that was formerly used to file with the IRS. As of 1 July 2013, FBAR is filed electronically and directly with the US Treasury instead of to the IRS in Detroit.
If information is not available to complete FBAR by 30 June, it is recommended that you file on time, then go back and amend Form 114 online later. On page 1 of FinCEN form, there are several reasons for late filing including “Other” which allows for 750 character explanation. “Other” can be used when filing in conjunction with the IRS Offshore Voluntary Disclosure Program.
No document can be attached to the Electronic Form.
Who Must File FBAR?
1. “United States Persons” must file if,
2. They have a financial interest in or signature authority over an account,
3. That account is a Foreign Financial Account(s), and (a.k.a. “Local” account for those living abroad)
4. The aggregate value of the account(s) exceeds $10,000 at any time during the calendar year.
5. Be sure to include Superannuation accounts in the aggregate value of the accounts.
“U.S. Persons” (definition)
1. U.S. citizens and Green Card Holder (worldwide)
2. U.S. residents – IRC 7701(b) with Substantial Presence test.
a) Part year residents under 7701(b) file only FBARs on accounts held during the election period
b) Residents who meet the substantial presence test, but rely on tax treaties to establish themselves as nonresidents for US tax purposes; are NOT exempted from FBAR filing requirements
3. U.S. entities – any entity created or organized in U.S. or under U.S. law. (Tax status disregarded.)
FINCEN Form 114
1. U.S. person holds title directly or is owner of record or named on the account on their own benefit or another person’s benefit
2. Someone else holds title for benefit of U.S. person
3. U.S. person holds an indirect (but FBAR reportable) financial interest in the foreign financial account of an Entity if the U.S. person has a >50% ownership interest in the entity, including Grantor Trust
• Authority of an Individual or indivuals who can control disposition of account assets in a foreign financial account who can control by direct communication (oral or written) to dispose of the account assets.
Only human beings – not business entities – have signature authority.
Foreign Financial Account (defined)
Anywhere outside of the United States – 50 states plus territories
Physical location –Account in a branch of US bank physically located in Foreign Country is a Foreign Account
- Cash or non-cash assets
- Bank, mutual fund, brokerage
- Brokers or Dealers of Commodities options
Does Not include:
- Real Estate
- Coins or Jewels
- Gold or Silver
Assets held personally not reportable
Individuals must use Form 8983 to report specified foreign financial assets with aggregate value greater then $50,000 at the last day of the year or more than $75,000 ($150,000 MFJ) at any time during the year – These dollar amounts are for Individuals living in the US. Different amounts apply for individuals living abroad. Form 8938 is filed with an individual’s annual Income tax return.
For the individual, there is significant overlap between the two forms. Filing Form 8938 with the IRS does not relieve an individual of the requirement to file FBAR. Many individuals will be required to file both Form 8938 and FBAR.
Just to remind you that this is not legal advice. Find someone experienced who can look at your personal situation and get it done correctly.
FBAR and Your Super
For the individual US Citizen, you need to include your SUPER in FBAR Reporting.
The Australian and US governments signed a much anticipated Intergovernmental Agreement (IGA) in respect of the U.S. Foreign Account Tax Compliance Act (FATCA) on 28 April 2014. For highlights of what the IGA means for Foreign Financial Institutions (FFI) read “Saved by the IGA?”
Because of the IGA, FFI in Australia will NOT:
- generally be subject to FATCA withholding;
- have to enter into individual FFI agreements with the IRS;
- have to report account holder information directly to the IRS;
- have to close the accounts of “recalcitrant account holders”; and
- have to deduct FATCA withholding from US withholdable payments they make to non-“participating” financial institutions, except in certain limited circumstances.
Basically the Australian govenment has agreed to take on the oversight on behalf of the IRS. Because of the IGA, Australian institutions will report to the ATO. The Australian government must now pass domestic legislation to impose the IGA obligations into Australian law and to address privacy law issues in relation to the collection, use and disclosure of personal information.
Australian Superannuation entities get an exemption?
Certain types of accounts and products are excluded from FATCA.
Superannuation Accounts reportable on FBAR
For the individual, if the balance of your Super Account (alone) or in aggregate with your other accounts totals $10,000 or more at any time during the calendar year, it must be reported on FBAR by 30 June of the following year.
Superannuation Earnings reportable as Income
Annual investments earnings – interest, dividends, etc. – should be reported on the individual’s tax return as income for the tax year. Even though you are not eligible to withdraw the money and even if it’s not taxable in Australia.
It is possible to file an FBAR without a US Social Security Number or ITIN. Line 3 is SSN/ITIN. Line 4 is for other Governmental ID. Enter Identification number and document type.
Defined Contribution Retirement Plans, where there are individual accounts and financial
FBAR = A Report of Accounts – separate requirement from any tax reporting
Phone number for assistance: 312 234 6146 or Email questions to: FBARquestions@irs.gov
Unable to file electronic FBAR? Call 800 949 2732 or 703 905 3975 to get a paper FBAR.