Prev Article
Next Article

FBAR (Foreign Bank Account Report): Top things to know about FBAR

05.15.23 // Cross Border // Blog Article //

Written by Dean Moro BComm, CIM®, Associate Financial Advisor, & Carson Hamill CIM®, CRPC®, Associate Financial Advisor, Assistant Branch Manager

If you are a U.S. person with financial assets (investment, pension, bank account, etc.) located outside of the United States, you are required to file an electronic report called the FinCEN Form 114, otherwise known as FBAR (formally called the Report of Foreign Bank and Financial Accounts). Failure to report this information can result in substantial penalties.In this blog we’ll discuss FBAR and your filing requirements in more detail.

FBAR & FinCEN Form 114

FBAR, also known as FinCEN Form 114, was formally called the Report of Foreign Bank and Financial Accounts. U.S. tax filers use this form to report foreign financial accounts that held a combined amount of $10,000 or more at any point during the calendar year.

What is FBAR?

FBAR stands for Foreign Bank Account Report.

FBAR is an electronic document used by the U.S. government to combat tax evasion. It assists the U.S. government in monitoring foreign financial accounts. The FBAR is submitted to FinCEN, the U.S. Treasury Department’s Financial Crimes Enforcement Network.

Who must file FBAR?

Any U.S. individual with foreign financial accounts more than $10,000 U.S. at any time throughout the calendar year must file an FBAR. Please note that any U.S. individual with signing authority on a foreign financial account that exceeds more than $10,000 will be required to file an FBAR.

It is more than just individuals who must file FinCEN Form 114. It also includes…

  • Estates
  • Trust
  • Partnerships
  • Corporations
  • Other entities

U.S. individuals residing in Canada or other countries long-term will usually have to file an FBAR annually. The filers must disclose through the report the balance in their foreign bank accounts.

Important to note:- It is not $10,000 per account, but rather an annual cumulative total determined on an aggregate basis- It includes joint and signature authority accounts - It does not matter if the financial account predates becoming a U.S. person- FBAR reporting is mandatory even if the person does not have a tax return filing requirement

When to file FBAR?

The FBAR is an annual filing due on April 15th, with an automatic extension to October, following the calendar year reported.

What is the penalty for late or missed filings?

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 FBAR penalties of up to $10,000 per violation, even if you didn’t know you had to file.Penalties are much higher if you are aware of your filing requirements and do not file, or file incorrectly - up to $100,000 per violation, or even higher depending on your account balances at the time of the violation.For more information, please click here to visit the IRS website.

What is the FBAR filing threshold?

If an individual has a combined balance across all foreign accounts exceeding $10,000 on any day of the calendar year, FinCEN Form 114 (FBAR) reporting must be filed. Note this is an aggregate amount, not per individual account.

Which foreign accounts are reported?

FinCEN Form 114 requires the individual to report the majority of foreign bank and financial accounts. In addition to bank accounts, this includes the following:

  • Foreign assets like stock that is held by foreign financial institutions.
  • Assets in a foreign branch of a U.S. financial institution.
  • Foreign mutual funds, life insurance or annuity contracts.
  • Foreign retirement accounts.
  • Accounts that you don’t own but are able to control.

How to file FBAR?

Individuals who need to file can go to the FinCEN.org website and follow the necessary steps using FinCEN’s BSA e-filing system.Alternatively, you can work with an experienced cross-border accountant to ensure you are filing correctly.

Maintaining records of FBAR reporting

Each account must report an FBAR, and it is recommended you maintain records for a minimum of five years after filing. Your records should include the following information:

  • Name on the account
  • Account number
  • Name and address of the foreign institution
  • Type of account, and
  • Maximum value during the year

Please note that the law does not identify the type of document to keep to record this information. Records can include bank statements, and/or a copy of a filed FBAR.

Form 8938

Introduced in 2012 (for the 2011 tax year), FATCA created a new information reporting requirement for U.S. taxpayers with respect to their foreign assets via Form 8938. There are numerous differences between the FBAR and Form 8938, most notably different reporting thresholds. Thresholds for Form 8938 depend on the tax filing status of the taxpayer and their location. To learn more about Form 8938 reporting requirements, click here or speak with an experienced cross-border tax professional.

FAQ about FBAR

Question: Who is excused from FBAR?

Answer: Green Card holders, U.S. citizens and resident aliens must file FinCEN Form 114, otherwise known as FBAR. However, filing is only required if the aggregate balance of all the foreign accounts you own or have signing authority over exceeds $10,000 at any point during the calendar year. If you don’t have foreign bank accounts, which includes signing authority over foreign accounts, or the combined value of these accounts does not exceed $10,000 on any single day, there is no requirement to file an FBAR.

Question: Do Individuals File FBAR?

Answer: Yes, individuals are required to file an annual FinCEN Form 114 if qualifying requirements are met.

Question: Do Entities File?

Answer: Yes, entities are required to file the FBAR as well.

Question: Do minors file?

Answer: Yes. There is no exclusion for minors when it comes to filing the FinCEN Form 114.

Question: Are trusts and estates required to file the FBAR?

Answer: Yes, trusts and estates are required to file FinCEN Form 114.

Question: What is the purpose of FBAR?

Answer: The purpose of FBAR is to combat tax evasion.

Question: Is FinCEN Form 114 the same as FBAR?

Answer: FBAR is the acronym for the Report of Foreign Bank and Financial Accounts. FBAR is otherwise known as FinCEN Form 114.

Question: What if I have never filed an FBAR, but I find out that I should have filed?

Answer: You must disclose the financial accounts for the years missed to avoid non-compliance costs. There is a process called IRS Streamlined Filing Compliance Procedure that can assist you in getting caught up with your FBAR filing requirements. If you find yourself in this situation, it would be best to consult with a cross-border tax professional.

Question: Do FBARs need to be filed every year?

Answer: Yes, FBAR is an annual report due April 15th, following the calendar year. If you miss the FBAR due date of April 15th, there is an automatic extension to October.

Summary

FBAR, also known as FinCEN Form 114, was introduced by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to combat tax evasion. Failure to report can result in substantial penalties. To ensure you are meeting your filing requirements, maintain accurate financial records, and be sure to discuss your situation with an experienced cross-border tax professional.

Next Steps

If you are planning on moving to Canada and need assistance with your investments, estate planning, and portfolio management, please call or email us at Snowbirds Wealth Management, as we specialize in cross-border financial planning and wealth management. We work closely with experienced cross-border lawyers and accountants to ensure you have a team behind you.

About Snowbirds Wealth Management

Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate financial advisors with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the U.S, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.

To schedule an introductory call, please click here.

Statistics and factual data and other information are from sources RJLU believes to be reliable but their accuracy cannot be guaranteed. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities nor is it meant to replace legal, accounting, taxation or other professional advice. We are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The information is furnished on the basis and understanding that RJLU is to be under no liability whatsoever in respect thereof.

Raymond James (USA) Ltd. advisors may only conduct business with residents of the states and/or jurisdictions in which they are properly registered. Investors outside the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this site. Raymond James (USA) Ltd. is a member of FINRA/SIPC.

Prev Article
Next Article