Need to File an FBAR – FinCEN Form 114 – for 2016? There’s Still Time… Just
Americans living abroad still have to file a US tax return declaring their worldwide income, as well as meeting their host country tax rules.
The good news is that there are several IRS exemptions, notably the Foreign Tax Credit and the Foreign Earned Income Exclusion, that help expats avoid double taxation, and that can be claimed when filing their US tax return.
Expats are also subject to further US filing requirements that don’t apply to most Americans living stateside, including the requirement to file a Foreign Bank Account Report, or what is called, FBAR.
Who has to file an FBAR?
Any American who has a total of at least $10,000 in foreign bank or investment accounts (the total can be shared among multiple accounts) is required to file an FBAR.
Qualifying accounts include checking, savings, investment, mutual and some pension accounts – any account with a positive cash balance.
Importantly, the accounts don’t necessarily have to be in the expats name if the expat still has any administrative control or signatory authority over them, so business accounts, joint accounts, and trust accounts can all qualify.
How do you file an FBAR?
An FBAR is technically FinCEN form 114, which must be filed online.
FinCEN form 114 requires the expats name and address, and information relating to all of their accounts, including account numbers and information to identify the financial institutions where the accounts are held.
When is the deadline for filing an FBAR?
“A record high 1,163,229 Report of Foreign Bank and Financial Accounts (more commonly, FBARs) were filed in 2015, up more than 8% from the prior year.” – Forbes
FinCEN form 114 must be filed online before October 15th (technically the deadline is April 15th, however there’s an automatic 6 month extension), so there is still time to file for tax year 2016… just!
What are the penalties for not filing an FBAR?
Penalties for not filing FBARs are steep, and start at $10,000 (per year) if FinCEN believes that the failure to file was willful.
Furthermore, since FATCA (the 2010 Foreign Account Tax Compliance Act), the majority of foreign financial institutions are now reporting their US account holders, including balance details, directly to the IRS, so that Uncle Sam knows who should be filing FBARs. As a result, it’s certainly not worth neglecting this requirement to file.
What if I should have filed FBARs for previous years too?
If you are up to date with your US tax return filing, you can simply back file your delinquent FBARs. Do so quickly though, before the IRS comes to you! If you are behind with your tax filing too, read on.
Back in 2014, the IRS realized that they needed a way for expats who were genuinely unaware about their US filing requirements to catch up with their federal tax return and FBAR filing without being penalized.
The result was the Streamlined Procedure amnesty program, which requires expats to file their last 3 tax returns (they are normally able to retro-claim the exemptions that help them avoid double taxation) and their last 6 FBARs (as necessary), and self-certify that their previous failure to comply was non-willful.
Now that the IRS is able to enforce US tax and FBAR filing requirements worldwide, as a result of FATCA as well as a raft of recently signed international tax information sharing agreements, we strongly recommend that expats who are behind with their filing contact a US expat taxes specialist at their earliest opportunity to help them catch up.