Reporting Foreign Bank Accounts
You must report accounts you hold in foreign banks and other financial institutions if the total balance across all your accounts is $10,000 or more at any time during the calendar year. Reporting includes accounts of which you’re the owner, as well as accounts for which you have authority to conduct transactions on behalf of the account owner. Report each foreign financial account you own or on which you have signature authority using FinCEN Form 114. You’ll provide information on all your financial accounts held in foreign countries, such as the name of the bank or financial institution where the account is held, your account number, and the account balance. Accounts that have multiple account holders or persons with signature authority might have several persons or businesses reporting the same account on separate foreign bank account reports.
Types of Reportable Accounts
The following types of financial accounts must be reported on the Foreign Bank Account Report if you meet the filing requirement threshold:
Bank accounts (checking and savings) Investment accounts Mutual funds Retirement and pension accounts Securities and other brokerage accounts Debit card and prepaid credit card accounts Life insurance and annuities having cash value
Income Thresholds for Reporting to the IRS
There are separate thresholds for being required to disclose foreign accounts to the IRS. The threshold starts at total foreign account balances of $50,000 on the last day of the year, or $75,000 at any time during the year for Form 8938 purposes. There are higher reporting thresholds for married couples filing jointly and for Americans living abroad.
Statute of Limitations for Reporting
There’s a six-year statute of limitations for the assessment of civil penalties for failing to report. The IRS advises that taxpayers should keep their foreign bank account report for six years.
Penalties for Not Reporting
The Treasury Department can impose penalties for failing to file FinCEN Form 114:
The penalty is up to $250,000 and/or up to five years in prison for failure to file or keep records.The penalty is up to $500,000 and/or up to 10 years in prison for any person willfully who violates the requirements to file.The penalty for giving false information is a fine of $10,000, up to five years in prison, or both.
When and Where To File FinCEN Form 114
FinCEN Form 114 is due April 15 of each year to report foreign bank accounts owned in the previous calendar year. FinCEN requires that Form 114 be filed electronically. The IRS indicates that you should file as soon as possible if you’re late filing Form 114, perhaps because you didn’t realize that you had to. The filing system allows you to enter previous calendar years. You can explain why you’re late. A blank copy of FinCEN Form 114 can be downloaded from the Financial Crimes Enforcement Network’s FBAR E-Filing page. Click on the link for FinCEN Report 114. The Report is filed directly with the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Treasury Department. FinCEN requires that foreign bank account reports be filed through the FinCEN website.
Coordinating FBAR With Your Return
The foreign bank account report isn’t a tax form, and it’s not submitted to the IRS, but information relating to the foreign bank accounts might have to be coordinated with information on your tax return. Income generated inside these foreign financial accounts is reported on the tax return for the year in which the income is earned. You’ll report the foreign income based on the type of income being generated. For example, interest and dividends would be reported on Schedule B, whereas capital gains would be reported on Schedule D. You might have to file Form 8938, Statement of Foreign Financial Assets, with your tax return in some cases. This tax form is separate from the foreign bank account report, although it contains similar information.
Exceptions to Filing
You don’t have to report accounts held at U.S. military banking facilities, even if they’re located in foreign countries. Military banks are considered to be domestic U.S. banks. You also don’t have to report U.S.-based accounts held by a branch or division of a foreign bank.
