Proposed Regulations Amend FBAR Reporting Rules
The U.S. Treasury Department recently issued proposed regulations, which make a number of modifications to the FBAR reporting rules. The changes are to become effective if and when the proposed regulations are finalized.
The FBAR (FinCEN 114)
For those unfamiliar with the FBAR reporting requirement, a quick word of introduction:
The Bank Secrecy Act (BSA) gives the Treasury Department the authority to collect information via the FBAR from United States persons, including expats, who have financial interests in or signature authority over financial accounts maintained with financial institutions located outside of the United States. The IRS is responsible for assessing and collecting civil penalties for FBAR delinquencies.
The BSA requires that a FinCEN Report 114, Report of Foreign Bank Account Reporting (the “FBAR”), be filed if the maximum values of the foreign financial accounts exceed $10,000 in the aggregate at any time during the calendar year. This means that if you have more than one financial account, you can pass the US$ 10,000 threshold even if you do not have that amount in any one particular account. When adding your balances together, accounts such as checking, savings, pension, cash value insurance policies, and other investment accounts need to be included.
FBAR Proposed Regulations
Some of the more notable changes in the proposed regulations include the following:
- They eliminate the requirement for officers and employees of companies to report foreign financial accounts for which they have signature or other authority, but have no financial interest, due solely to their employment, provided that the employer itself has an FBAR filing obligation to report the account.
- They require that entities/employers maintain information identifying all officers and employees with signature authority over the foreign financial accounts in which the entities/employers have a financial interest. This information would need to be retained for a period of 5 years and be made available upon request.
- They remove certain simplification rules that allow limited information to be reported when a U.S. person has 25 or more reportable foreign financial accounts. The proposed regulations instead require all U.S. persons making an FBAR filing to report detailed account information on all reportable foreign financial accounts without regard to the number of accounts.
FBAR Filing Date
The FBAR is due by June 30th of each year, and extensions are not allowed. However, in accordance with recent legislation, for tax years 2016 and onwards, the FBAR form filing due date will be moved to April 15th, but with a maximum extension for a 6-month period ending on October 15th. The proposed regulations include the new due date for the FBAR filing.
If you are a citizen living abroad and have an FBAR requirement, it is important that you file accurately and on time – penalties for non-compliance can be severe. At Expat Tax Professionals, we’ve helped numerous expat clients with their U.S. tax returns and FBAR filings. We’ve also helped clients with overdue FBARs come into compliance with little to no penalties. When it comes to filing the FBAR, your best bet is enlisting the help of an Expat Tax Professional.
By Ephraim Moss, Esq. & Joshua Ashman, CPA