Congress has taken significant steps to ensure that worldwide taxable income subject to United States taxation is properly reported. A major part of that effort is predicated upon collecting information on foreign bank accounts. For more details about this effort, see our previous FBAR and FATCA post.
Reporting Requirements
All United States citizens and resident aliens with an interest in or signature or other authority over foreign financial accounts, whose total value exceeded $10,000 at any time during 2015, must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114 [Report of Foreign Bank and Financial Accounts (FBAR)] by June 30, 2016.
Beginning next year, the due date for reporting these foreign accounts will be accelerated to April 15.
For those not accustomed to these filing requirements, there are the two forms that taxpayers who have foreign financial accounts or assets may have to submit.
- The FBAR has been around for many years as Form TD F 90.22.1 but has been replaced by FinCen Report 114 as of tax year 2013. It is submitted separately from an individual’s personal income tax return. The FinCEN 114 can only be electronically filed.
- Form 8938, Statement of Specified Foreign Financial Assets, has been in existence since tax year 2011, as part of the new FATCA legislation and is included in the tax return.
A chart comparing the forms and requirements can be found on the IRS website. Complete line-item instructions and links to file can be found at the U.S. Treasury FinCEN website.
Who Needs to File
As noted, the filing requirements mandate that U.S. citizens, U.S. residents, trusts, estates, and domestic entities that have a financial interest in or signature authority over foreign financial accounts; and the aggregate value of the foreign accounts exceeds $10,000 at any time during the calendar year must report these accounts. These terms are further detailed below.
- Financial interest: (1) you are the owner of record or holder of legal title or the owner of record; or (2) holder of legal title is your agent or representative; or (3) you have a sufficient interest in the entity that is the owner of record or holder of legal title.
- Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.
If you have child with over $10,000 in foreign accounts, a separate FBAR will be required for your child even if you declare the account on your FBAR as custodian.
Note that the penalties to file required foreign reporting forms can be severe.It is critical that those individuals required to report do so. Should you have questions as to whether these reporting requirements apply to you, please contact Bob Grossman or Mike Weber at 412-338-9300.
