Owning a bank account abroad likely triggers an FBAR reporting obligation on an annual basis. Unfortunately for expats, late filing can result in severe FBAR penalties. We are here to keep you current and to help you catch up if needed. To get a better understanding of the FBAR basics, you can read our introduction to the FBAR below. The FBAR form formally referred to as FinCEN Form 114) must be filed electronically using the BSA E-Filing System maintained by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”).
What is a Foreign Financial Account? Financial accounts include the following types of accounts: Bank accounts such as savings accounts, checking accounts, and time deposits. Securities accounts such as brokerage accounts and securities derivatives or other financial instruments accounts. Insurance policies with a cash value (such as a whole life insurance policy) Mutual funds or similar pooled funds (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions) Typically, a financial account that is maintained with a bank or financial institution located outside of the United States is a foreign financial account.
If two persons jointly maintain a foreign financial account, or if several persons each own a partial interest in an account, then each U.S. person has a financial interest in that account and each person must report the entire value of the account on an FBAR (exceptions may apply in the case of a married couple).
Late FBAR Penalties
A non-willful failure to report foreign bank accounts can result in a penalty of up to $10,000 per account per year, an amount subject to annual inflation. The IRS has stated that these penalties represent maximum amounts and lower penalties may be appropriate depending on the circumstances.
A willful failure to file may be subject to civil penalties equal to the greater of $100,000 (also subject to inflation) or 50% of the balance in each unreported account. In addition, criminal penalties of up to $250,000 or 5 years in jail (or both) may apply in the case of willful conduct.
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