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What Are IRS FBAR Filing Requirements?
If you have $10,000 or more invested in a total of all foreign accounts or estates, and you are required to file a US tax return, you must file the Report of Foreign Bank and Financial Accounts (FBAR) annually.
Filing FBARs can help the government identify those who may be using financial accounts in foreign countries to bypass US laws to hide income – and to trace funds that have been utilized for illegal purposes.
What is the Deadline for Filing an FBAR?
The FBAR is filed annually and must be submitted before April 15. In most instances, it is essential to report all foreign financial accounts, even if the account does not generate taxable income.
FBARs are not filed with tax returns, but the dates and extensions have been aligned with the tax filing. So if you are an expatriate living abroad and you are eligible for the automatic extension to June 15 for your US return, then the FBAR filing deadline is also the same. Similarly, if you get a six-month extension for tax filing, then your FBAR deadline will also be moved to October 15. It is mandatory to file FBARs electronically, and an acknowledgment is issued when the process is completed.
Exceptions to FBAR Reporting Requirements
Certain US persons and foreign financial accounts are exempted from filing the FBAR. These include:
Specific beneficiaries and participants of tax-qualified retirement plans
Qualifying overseas financial accounts where spouses are joint owners
Beneficiaries and owners of American IRAs
An overseas financial account owned by a government entity
Overseas financial accounts situated at a US military banking site
US persons included in a consolidated FBAR
Overseas financial accounts owned by an international financial institution
Anyone with signatory authority over a foreign financial account but no financial interest in it
Under special circumstances, beneficiaries of a trust
A qualified tax professional may be able to offer you the necessary guidance in determining whether you need to file an FBAR or not.
It is essential to get this right because failure to comply with mandatory FBAR regulations can result in serious penalties. If there is no reasonable cause to justify a failure to comply, the penalty can be up to $10,000. In cases where the IRS determines that regulations were willfully violated, the penalty can hit $100,000 or half of the total account balances, whichever is higher. In some instances, criminal penalties are likely.
About the Author
Mark Steber is Senior Vice President and Chief Tax Information Officer for Jackson Hewitt. With over 30 years of experience, he oversees tax service delivery, quality assurance and tax law adherence. Mark is Jackson Hewitt’s national spokesperson and liaison to the Internal Revenue Service and other government authorities. He is a Certified Public Accountant (CPA), holds registrations in Alabama and Georgia, and is an expert on consumer income taxes including electronic tax and tax data protection.
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