Are you aware that if you fail to file FBAR (Foreign bank account report), you have to pay harsh penalties? In this blog, we at USTAXfiling.in will discuss all the minute details related to FBAR. Continue to read till last and get all the updates related to FBAR at USTAXFiling.in!
There is no doubt that filing US income tax returns is a responsibility of Americans staying overseas, such as foreign bank account reporting. It is a big deal, but why? If you fail to file the foreign bank account report filing, it grabs the attention of the IRS, and you have to pay harsh penalties. To make sure that you stay compliant, we have made a list of things that you must know about FBAR filing and FBAR reporting needs.
- The foreign bank account report automatically gets an extension till the 15th of October every year.
- FinCen 114 or FBAR should be filed if you have more than $10,000 at any time during the financial year in all of your combined foreign bank accounts, including your total balance of less than $10,000 in each individual account.
- If you and your partner only hold joint accounts, then you may file FinCen 114a to cover both of them; otherwise, each partner should file an FBAR.
What Is the Foreign Bank Account Report?
The FBAR also called as Foreign bank account report is a yearly report that all US residents, citizens, and specific other individuals should file with the Department of State Treasury in which an individual has a financial interest or has authority over a bank account abroad with an approximate value of more than $10,000 at any time during the year.
You must remember that those who file foreign bank account reporting should not be taxed on the balance of the bank accounts or anything of that sort. It is a reporting requirement so the IRS understands what money lies abroad.
If you are an expat with a foreign bank account who is neglecting your needs, it may result in charges that start from $12,500 and legal matters too. The government of the United States takes measures to proscute and investigate US expats who fail to report their foreign-held financial property. It means that the risk of non-compliance with foreign bank account report regulations is more significant than ever.
Luckily, there are ample simple methods to comply with your needs. In this blog, we will discuss what you must know about the FBAR, including:
- When to file FBAR
- FBAR deadlines
- Who should file an FBAR?
- Topics related to the Foreign Account Tax Compliance Act
Who Should File the FBAR?
Any US individual who is considered a tax resident of the United States with a foreign account balance of more than $10,000 at any point during the financial year may have to file an FBAR. This need is triggered even if the balance is $10,000 for a second or for a day.
The foreign bank account reporting criteria is an aggregate amount. It means that if you have several accounts, the total balance of accounts is something that will trigger a filing need. So, if you think that you keep $4000 in one bank account and $7000 in another, it may help you to eliminate filing, but this is not the scenario.
Report Joint Accounts and All Others You May Access
FBAR filing needs may apply to all foreign financial accounts for which you have a signature authority or financial interest.
- Signature Authority
It means that you have a level of control over the disposition properties through direct interaction with the institution. One good example of this is when a senior person adds their kids to their bank account to permit their kids to assist them with their finances.
- Financial interest
Financial interest is considered depending on who the real owner of the amount is. It means that you have to report the amount that someone owns but holds in your bank account that is not in their name but under the name of that person, for example, their friend, business partner, or lawyer.
If you were a signatory on one of your employer’s accounts, this bank account must be reported on your FBAR. You must report a joint account with your partner.
FBAR Implies to All US Individuals, Not Citizens
The IRS says that the FBAR is needed for United States individuals who meet the reporting criteria. The term US individuals refers to:
- Resident aliens
- US-based companies
There are a few exceptions to the FBAR (Foreign bank account reporting) needs. For instance, citizens of the United States staying overseas who own specific types of financial accounts, including those maintained by an international financial institution or government, do not need to report them on FBAR. You must consult with a professional CPA to know if you are eligible.
How to File the (Foreign bank account reporting) FBAR?
The foreign bank account reporting is a separate filing from your income tax return. It should be submitted separately to the FinCEN, which is a different branch of the Treasury Department. It is not at all filed with the IRS. You may use FinCEN 114, to file an FBAR and must submit it through the BSA e-filing site electronically.
The process is simple and easy, requiring you to collect all pertinent account details and enter them into the online system. You will have a third party, a certified income tax preparer; all you have to do is e-sign FinCEN 114a to give authority to the party., and prepare it for you.
Details to Include on the FBAR
Many income tax filers should report their foreign bank account balances. Also, you should report any of the following that implies:
- Foreign mutual funds
- A financial account that is held at a foreign branch of a US bank
- Foreign investment accounts (the bank account should be reported, but the content should not be separately reported)
- Several types of pension and retirement accounts
- Foreign-issued annuity or life insurance contract with a cash surrender value.
How to Report Joint Accounts on the Foreign Bank Account Reporting?
If you and your spouse have only held joint accounts, have your partner sign FinCEN form 114a to help you file the FBAR on their behalf. If your partner has many accounts that you are not on, they should file their Foreign bank account reporting separately. When you file separately, you should both include your joint accounts on every individual form.
Good Records Is the Foundation of FBAR Filing
Recordkeeping is necessary to keep up with how you should file the FBAR. Submitted forms should include the following details:
- Account type
- The other designation or account number
- The address and name of the institution or other individual with whom the account is maintained.
- The account name
- The maximum value of each account during the reporting time
Several expats also find that they need to file for one year and not the other one. For this purpose, it is necessary to make record-keeping a habit.
FBAR Deadline for US Expats
The FBAR should be filed by 15th April 2024. If you miss the deadline, there is an automatic extension to 17th October.
Want to File An FBAR? Get Assistance Now!
If you wish to file an FBAR and need assistance, then you must connect with FBAR. Our experts at USTAXFiling.in ensures to help you file an FBAR in the best possible way. Our USTAXFiling.in experts have years of experience in resolving your queries related to income tax filing. If you have any queries, they will be happy to answer as they keep all the necessary updates related to FBAR filing! What are you waiting for? Call USTAXFiling.in right away!