What is FBAR – the Report of Foreign Bank and Financial Accounts?
Report of Foreign Bank and Financial Accounts (FBAR) is a form that must be filed by anyone with an account in a foreign country. Read on to see answers to the questions: Who Must File FBAR and How to File FBAR?
FBAR, or the Report of Foreign Bank and Financial Accounts, was created by the US government to combat tax evasion. The filing requirement applies to all US persons with a financial interest in a foreign bank account. In addition, certain entities created under US law may also have to file this form.
FBAR has been in place for many years. It is a mandatory information return that reports the total balance of all foreign financial accounts held by a US person or entity during the tax year.
Who Must File FBAR?
If you have an account that exceeds $10,000 in value during the tax year, you must file an FBAR form. FBAR is required to be filed by the first non-holiday weekday in April. If you are unable to file your FBAR, you can apply for an automatic extension until October 15 of the following year.
You will have to pay the penalty if you do not file your FBAR and apply for an extension. The penalty amount is based on the account’s value at the time of the violation.
How to File FBAR?
The IRS requires filing FBAR on behalf of all American citizens with foreign accounts. It is a separate tax form from the income tax return. It must be electronically filed through the FinCEN BSA E-Filing System.
The report must include the following and be filed by the FBAR deadline, April 15 of every year.
- The name and address of the financial institution.
- The maximum account balance during the year.
- The type of account.
- The number of accounts.
In order to file an FBAR, you will need to gather information about your accounts and enter them into an online system. You may also authorize another person to file your FBAR on your behalf. If you have more than 25 foreign financial accounts, you will need to also maintain records to support your filing.
If you are unsure about whether you need to file FBAR, you should consult a tax professional. You should also consider the option of participating in an amnesty program. Depending on how long you have been delinquent in filing your FBAR, you may qualify for one of these programs.
What Happens If You Don’t File FBAR?
FBAR, also known as the Report of Foreign Bank and Financial Accounts, is required by the IRS to be filed by all US citizens with a foreign bank or financial account. Failure to file can result in heavy penalties.
FBAR penalties can vary, depending on the definition of a violation. For instance, if a taxpayer fails to file an FBAR that is based on a willful violation, a penalty can be up to 50% of the account’s value. Similarly, a non-willful violation can result in a penalty of up to $10,000. Generally, penalties are assessed on a per-account basis.
You may be eligible for a tax amnesty program if you are assessed a civil penalty for your FBAR failure. You should be aware, however, that you may be excluded from these programs if you have been found criminally liable for failing to file FBAR.
