Many people unknowingly have an FBAR filing requirement. If you are a US taxpayer with signature authority over a foreign bank account or other financial asset with a value of over $10,000, you likely have an FBAR filing requirement. FBAR refers to FinCen form 114.
What is the FBAR?
The FBAR is a form that is used to report to the federal government your foreign financial assets, including bank accounts, retirement accounts, investments and other similar financial assets. The FBAR does not include real estate that you own individually. US taxpayers who have a filing requirement report and disclose their foreign financial assets on the FBAR. There is no tax applied to the value of the financial assets disclosed on the FBAR form. The FBAR is not part of the tax return but is a separate form filed directly with FinCen. The filing deadline for the FBAR is typically June 30th of the year following the year in which a filing requirement arises.
US Taxpayers and the FBAR
A Unites States taxpayer includes:
- S. citizens,
- S. residents,
- entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States, and
- trusts or estates formed under the laws of the United States. See https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar.
Who is a US resident for FBAR purposes?
It is important to note that the definition of US resident does not necessarily follow any definitions in immigration law. The two important tests of residency are found in Internal Revenue Code section 7701(b). They are:
- The green-card test. Individuals who at any time during the calendar year have been lawfully granted the privilege of residing permanently in the U.S. under the immigration laws automatically meet the definition of resident alien under the green-card test.
- The substantial-presence test. Individuals are defined as resident aliens under the substantial-presence test if they are physically present in the U.S. for at least 183 days during the current year, or they are physically present in the U.S. for at least 31 days during the current year and meet the specifications contained in IRC 7701(b)(3). For more information, see https://www.irs.gov/irm/part4/irm_04-026-016.html#d0e146.
You can read the language in the code pertaining to the residency test here: https://www.law.cornell.edu/uscode/text/26/7701. It is important to remember that even if a person is not a green card holder, he or she may have an FBAR filing requirement. The FBAR FinCen form can be found here: https://www.fincen.gov/forms/bsa_forms/fbar.html.
The FBAR must be filed even if there is no income associated with the financial asset. There is no tax or penalty that must be paid upon filing the FBAR; however, if the FBAR is filed untimely, the IRS can assess penalties against the taxpayer. For more information, review our following wepages: FBAR Penalties; OVDP; Streamlined OVDP; Delinquents FBAR submission procedures.
CONTACT AN IRS FBAR ATTORNEY
Contact the Los Angeles tax attorneys at Disparte Tax Law for a free consultation about your potential FBAR filing requirement and what to do if you have failed to timely file an FBAR.