FBAR Instructions for US Expats Filing FinCEN Form 114
Americans living abroad are still required to file a US tax return, and furthermore, they may have to report their foreign bank and investment accounts by filing a Foreign Bank Account Report, or FBAR.
Due to the 2010 Foreign Account Tax Compliance Act (FATCA), most foreign banks and other financial firms are now reporting their American account holders account balance and contact details to the IRS.
As a result, the IRS knows who should be filing an FBAR and who shouldn’t, so with penalties for not filing (or not completely or correctly filing) FBARs so high, expats are strongly advised to take FBAR filing seriously.
Now for two pieces of good news: firstly, filing an FBAR isn’t particularly difficult; and, secondly, expats who have multiple years of tax return and FBARs filing to catch up on, because they weren’t previously aware that they had to, can do so using the IRS Streamlined Procedure, meaning they won’t face any penalties.
An FBAR is really called FinCEN form 114, and it is filed online.
Who must file?
All Americans who have a $10,000 or more in total in foreign accounts at any time during the tax year are required to file an FBAR to report all of their foreign accounts.
Children are responsible for filing their own FBARs, although if they are too young or otherwise unable to, their parents or guardian can file it for them.
Expats must also include any accounts that they have a financial interest in or signatory authority over. These may include business accounts, trust accounts, or joint accounts.
What types of accounts must be reported?
“If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly by filing FinCEN form 114.”
– the IRS
Generally speaking, types of accounts that expats should report on FinCEN form 114 are any account with a monetary balance that is held outside the US (including at foreign branches of US financial firms).
These include checking, savings, brokerage, securities, demand, deposit, some pension, and any other type of investment account. Note that mortgage accounts do not need to be reported on an FBAR.
Instructions for expats filing FinCEN form 114
Up until 2016 tax year, FBARs had to be filed by June 30th, however FBARs for 2016 and subsequent tax years have to be filed before April 15th, with an extension automatically applied until October 15th.
FinCEN form 114 is filed online, and it is one of the more straightforward US tax forms to file. It requires that expats enter their personal and contact information, as well as the details for all their foreign accounts.
For each account, expats should enter the account name, the account number, the type of account, the name and address of the bank or other financial institution where the account is held, and the maximum account balance during the tax year. Records of this information should be kept for a minimum of 5 years after filing.
When entering phone or account numbers, expats should omit all formatting such as spaces, hyphens, or parentheses, and when entering maximum account balances expats should round them up to the nearest dollar.
Expats should convert non-dollar account balances into dollars before entering them on FinCEN form 114 using the Treasury’s Financial Service Management rate for the last day of the relevant tax year.
Can a tax preparer file FinCEN form 114 on an expat’s behalf?
A tax preparation firm can file FBARs on an expat’s behalf, and this is often a cost effective and time-saving solution for Americans living abroad, particularly those who have to file multiple years’ FBARs and US tax returns when catching up using the Streamlined Procedure.