FBAR Filing: How (and When) to Report Money in Foreign Accounts
If you're a U.S. citizen with money in offshore accounts, understanding the basics behind FBAR filing is key to having an easy tax season. Our experts tell you what you should know below.
As an American living abroad, it's no surprise that you may have a financial account (banking, pension, investment, etc.) located outside of the U.S. But you may be surprised to know that just by keeping your money in a foreign account, you might have special reporting requirements, known as an FBAR (Foreign Bank and Financial Accounts Reporting). The form you fill out is FinCEN Form 114.
Below we'll run through everything you need to know about filing, including:
- What an FBAR is
- Who files
- Deadlines for 2019 and 2020
- Filing instructions
- Penalties for not filing
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What is an FBAR?
An FBAR is your Foreign Bank Account Report, also known as FinCEN Form 114. If you're in the reporting threshold, you submit it yearly.
The Foreign Bank Account Report exists to combat tax evasion, specifically reporting money and assets in foreign banks. Rather than filing with the IRS, you submit an FBAR with FinCEN, the U.S. Treasury Department's Financial Crimes and Enforcement Network. Failing to file means facing heavy penalties, so it’s always in your best interest to stay up to date.
Most expat tax filers will just report the balance in their foreign bank accounts, but you may also have to report:
- Foreign assets like stock that’s held by foreign financial institution
- Assets in a foreign branch of a U.S. financial institution
- Foreign mutual funds, life insurance or annuity contract
Who files an FBAR? When you should report money in foreign accounts
Wondering who files an FBAR? Whether you live in the U.S. or abroad, every U.S. person (U.S. citizens, green card holders, resident aliens) is required to file FinCEN Form 114 if they are an owner, nominee, or can control the distribution of the account's funds. If the combined balance of all your foreign accounts is more than $10,000 at any point during the calendar year, you must file FinCEN Form 114.
For example, suppose you are a U.S. citizen living in Brazil and you have two checking accounts and a poupança account at a Brazilian bank that together held $15,000 during 2019. In this case, you must file an FBAR for 2019 even if each account only held $5,000.
Foreign financial accounts include bank accounts, securities accounts, and certain foreign retirement arrangements. Accounts located outside of the 50 states, D.C., the U.S. possessions, and tribal territory are considered "foreign" accounts. Certain correspondent or nostro accounts, and accounts held by governmental entities generally are not subject to the FBAR filing requirement.
What else should you know?
What else should you know? If you’re a U.S. expat, you may need to file more forms than just FinCEN Form 114. You will need to complete Schedule B, Part III of your tax return and possibly Form 8938. Form 8938 and Schedule B are part of your tax return, unlike the FBAR, which is filed separately.
Generally, U.S. citizens and resident aliens report all worldwide income, including income from foreign trusts and foreign bank and securities accounts, such as interest income. To do this you’ll need to complete and attach Schedule B (Form 1040) to their tax returns. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and also requires U.S. citizens to report the country in which each account is located. If that describes you, you'll answer "yes."
In addition, you may also have to complete and attach Form 8938 to your return. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions of this form for details.
Note that filing the Form 8938 does not replace or otherwise affect your requirement to file FinCEN Form 114.
FBAR deadlines for 2019 and 2020
If you want to avoid penalties, make sure to file FinCEN Form 114 timely. Normally, the FBAR deadline is April 15 following the calendar year you're reporting. However, the filing deadline for 2019 taxes is July 15 (due to the stimulus package tax deadline extension).You can get an extension to October 15 as well.
If you're required to file, you must file one every year.
Not sure whether you must file one for 2019 or 2020? We can help determine once we’ve looked over all your tax documents. You can start uploading them today by beginning your U.S. expat tax return with H&R Block Expat Tax Services.
How to file an FBAR: Instructions for FinCEN Form 114
Your FBAR filing instructions for 2019 and 2020 are the same as the filing instructions in 2018. It must be filed electronically through FinCEN's BSA e-filing system or with a preparation service, such as H&R Block Expat Tax Services.
Married taxpayers should take note: In very few situations are you able to submit a joint FBAR. If you own accounts jointly with your spouse, and either none or only one of you own a separate account, you are able file a single report. Otherwise, each spouse must file their own. If you are filing prior year or an amended form, you must still use FinCEN's website to do so and you must file separate accounts.
When you work with H&R Block Expat Tax Services, your expat tax advisor will guide you in each step of the filing process.
Why should I file an FBAR? Penalties for not filing
What happens if you don’t file when you’re supposed to? In short, the answer here is penalties. Not filing costs you—under the current rules, if you're required to file but either you do not file on time or if you do not correctly report your foreign accounts, you can be subject to a penalty of up to $10,000 per violation. This is true even if you did not know you were required to file.
The FBAR penalties are much steeper if you knowingly fail to file. If you’re aware of your requirement and do not file accurately, or if you don't file it on time, you could get hit with a $100,000 penalty per violation or an even higher penalty, depending on your account balances at the time of the violation.
Get help with your FBAR filing with the expat tax pros at H&R Block
Have questions about filing? Ready to file FinCEN Form 114? No matter how complicated your U.S. tax return is, there's an expat tax expert ready to help.
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