Foreign bank account rules were designed to combat money laundering, terrorism, and tax evasion. Unfortunately, you get penalized if you don’t follow the new rules.
Q. What is FBAR?
A. FBAR is a Report of Foreign Bank and Financial Accounts on Form TD F 90-22.1.
Q. Who must file an FBAR?
A. Any United States person who has a financial interest in or signature authority over any financial account in a foreign country, if the aggregate value exceeds $10,000 at any time during the calendar year.
Q. Who is a United States person?
A. “United States person” includes a citizen or resident of the United States, a domestic partnership, a domestic corporation, or a domestic estate or trust (the term “domestic” means formed in the US).
Q. What is a foreign country?
A. “Foreign country” includes all geographical areas outside the United States, Puerto Rico, Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands.
Q. Am I required to report bank accounts in a foreign country?
A. Yes, if you have more than $10,000 at any time outside the US.
Q. Am I exempted from reporting if my accounts are in Philippines pesos, Euros, Chinese Yuan, or Mexican pesos?
A. No, you are not exempt from reporting foreign accounts just because they are not in US dollars. Convert international denominations to US dollars and report FBAR if the amount is more than $10,000.
Q. What constitutes signature or other authority over an account?
A. A person has signature authority over an account if such person can control the disposition of money.
Q. When is the FBAR due?
A. The FBAR is due by June 30 of the year following. There is no extension of the due date. (TIP: If you do not have all the available information to file the return by June 30, file and amend later).
Q. How do you amend a previously filed FBAR?
A. Amended FBARs must now be filed online.
Q. Should I file FBAR with my income tax return?
A. No, the FBAR is a separate report and should not be filed with your Federal tax return.
Q. What happens if an account holder fails to file a required FBAR report?
A. Failure to file an FBAR may result in civil penalties, criminal penalties or both.
Q. Can cumulative FBAR penalties exceed the amount in a taxpayer’s foreign account?
A. Yes, penalties can be assessed every year. Repeated penalties can exceed what is inside the bank accounts.