Do You Have a Foreign Financial
Account?
If you own or have authority over a foreign
financial account, including a bank account,
brokerage account, mutual fund, unit trust,
or other types of financial accounts, then
you may be required to report the account
yearly to the Internal Revenue Service. Under
the Bank Secrecy Act, each United States
person must file a Report of Foreign Bank and
Financial Accounts (FBAR), if
-
The person has a financial interest in,
or signature authority (or other
authority that is comparable to signature
authority) over one or more accounts in a
foreign country, and
-
The aggregate value of all foreign
financial accounts exceeds $10,000 at any
time during the calendar year.
A United States person is not prohibited from
owning foreign accounts. The FBAR is required
because foreign financial institutions may
not be subject to the same reporting
requirements as domestic financial
institutions. The FBAR is a tool to help the
United States government identify persons who
may be using foreign financial accounts to
circumvent United States law. Investigators
use FBARs to help identify or trace funds
used for illicit purposes or to identify
unreported income maintained or generated
abroad.
Definition of Terms
A “United States person" includes
a citizen or resident of the United States,
or a person in and doing business in the
United States. Whether a person is
considered, for FBAR purposes, to be in, and
doing business in the United States is
determined based on an analysis of the facts
and circumstances of each case.
Generally, a person is not considered to be
in, and doing business in the United States
unless that person is conducting business
within the United States on a regular and
continuous basis. Persons who are
merely visiting the United States or who
sporadically conduct business in the United
States, are not in, and doing business in,
the United States for FBAR reporting
purposes.
A foreign country includes all geographical
areas outside the United States, the
Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, and the
territories and possessions of the United
States (including Guam, American Samoa, and
the United States Virgin Islands).
Reporting and Filing
Information
A person who holds a foreign account may have
a reporting obligation even though the
account produces no taxable income. A foreign account holder must mail the Form 114 on or before June 30 of the
following year to US Department of the Treasury. The FBAR is NOT to
be filed with the filer's Federal
income tax return. There
is no extension available for filing the
FBAR.
Account holders who do not comply with the
FBAR reporting requirements may be subject to
civil penalties, criminal penalties, or both.
Exceptions to the Reporting
Requirement
There are exceptions to the reporting
requirement. These exceptions
include:
-
Accounts in U.S. military banking
facilities operated by a United States
financial institution to serve U.S.
Government installations abroad are not
considered to be accounts in a foreign
country for purposes of the reporting
requirement.
-
An officer or employee of a bank that is
subject to the supervision of the
Comptroller of the Currency, the Board of
Governors of the Federal Reserve System,
the Office of Thrift Supervision, or the
Federal Deposit Insurance Corporation, is
not required to report having signature
or other authority over a foreign account
if the officer or employee has no
personal interest in the account.
-
An officer or employee of a domestic
corporation whose equity securities are
listed on a national securities exchange
or which has assets exceeding $10 million
and 500 or more shareholders of record,
is not required to report having
signature or other authority over a
foreign account if the person has no
personal financial interest in the
account, and the officer or employee has
been advised in writing by the chief
financial officer of the corporation that
the corporation has filed a current
report that includes the foreign account.
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