The FBAR. What is it?
Per the Bank Secrecy Act, every year you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on Financial Crimes Enforcement Network (FinCEN) Form 114.
Who Must File
A U.S. person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:
- a financial interest in or signature or other authority over at least one financial account located outside the United States if
- the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
Generally, an account at a financial institution located outside the United States is a foreign financial account. Whether the account produced taxable income has no effect on whether the account is a foreign financial account for FBAR purposes.
When to File
FinCEN would like to reiterate, the annual due date for filing FBARs for foreign financial accounts is April 15. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act). Specifically, section 2006(b)(11) of the Act changed the FBAR due date to April 15 to coincide with the Federal income tax filing season. The Act also allows an extension of the filing deadline of up to six months. To implement the statute with minimal burden, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year. Accordingly, specific requests for this extension are not required.
The FBAR filing deadline will follow the Federal income tax due date guidance, which notes that when the Federal income tax due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.
How to File
You must file the FBAR electronically through FinCEN’s BSA E-Filing System. You don’t file the FBAR with your federal tax return.
If you want to paper-file your FBAR, you must call FinCEN’s Resource Center to request an exemption from e-filing. See Contact Us below to reach this resource center. If FinCEN approves your request, FinCEN will send you the paper FBAR form to complete and mail to the IRS at the address in the form’s instructions. IRS will not accept paper filings on TD F 90-22.1 (obsolete) or a printed FinCEN Form 114 (for e-filing only).
If you want someone to file your FBAR on your behalf, use the FinCEN Report 114a, to authorize that person to do so. You don’t submit FinCEN Report 114a when filing the FBAR; just keep it for your records and make it available to FinCEN or IRS upon request.
For each account you must report on an FBAR, you must keep records with this information:
- Name on the account,
- Account number,
- Name and address of the foreign bank,
- Type of account, and
- Maximum value during the year.
The law doesn’t specify the type of document to keep with this information. Documents may include bank statements or a copy of a filed FBAR if they have the required information. Generally, you must keep these records for five years from the due date of the FBAR. Exception: An officer or employee who files an FBAR to report signature authority over an employer’s foreign financial account doesn’t need to personally keep records on these accounts. The employer must keep the records for these accounts.
You may be subject to civil monetary penalties and/or criminal penalties for FBAR reporting and/or recordkeeping violations. Assertion of penalties depends on facts and circumstances. Those who must file an FBAR and fail to timely file a complete and correct FBAR may be subject to civil monetary penalties, criminal penalties, or both. If they properly report the foreign financial account on a late-filed FBAR, and the IRS determines the FBAR violation was due to reasonable cause, no penalty will be imposed
Civil monetary FBAR penalties have varying upper limits, but no minimum. These upper limits must be adjusted annually for inflation (Federal Civil Penalties Inflation Adjustment Act of 1990, as further amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015). Beginning with penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015, Title 31 of the Code of Federal Regulations (CFR) section 1010.821, Penalty Adjustment Table, provides the adjusted maximum penalty amounts. The inflation-adjusted civil and criminal penalties that may be asserted for not complying with the FBAR reporting and recordkeeping requirements are summarized below.
- Civil Penalty Authority: 31 USC 5321(a)(5)(B)
- Civil Penalty Amount: Up to the amount in 31 CFR 1010.821
- Criminal Penalties: N/A
- Comments: Applies to all U.S. persons.
- Civil Penalty Authority: 31 USC 5321(a)(5)(C)
- Civil Penalty Amount: Up to the greater of:
- ▪ the amount in 31 CFR 1010.821, or
- ▪ 50% of the amount in the account at the time of the violation.
Filing Delinquent FBARs
Filing an FBAR late or not at all is a violation and may subject you to penalties. If the IRS hasn’t contacted you about a late FBAR and you’re not under civil or criminal investigation by the IRS, you should file late FBARs as soon as possible to keep potential penalties to a minimum
Filing Requirement for Virtual Currency
Currently, the Report of Foreign Bank and Financial Accounts (FBAR) regulations do not define a foreign account holding virtual currency as a type of reportable account. For that reason, currently, a foreign account holding virtual currency is not reportable on the FBAR (unless it is a reportable account under 31 C.F.R. 1010.350 because it holds reportable assets besides virtual currency). However, FinCEN intends to propose to amend the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts (FBAR) to include virtual currency as a type of reportable account under 31 CFR 1010.350.