The FBAR (Foreign Bank Account Report) deadline is approaching and many expats are unaware of whether or not they need to file. Because the penalties for failing to file FBAR can be steep, let's take a closer look at the filing requirements and how exactly it is filed.
FBAR is a major component of the US effort to thwart tax cheats who are hiding money in overseas accounts. If you have a financial interest in or signing authority over foreign financial accounts with a cumulative balance of $10,000 or more at any point during the year, you are report each account on the FBAR. It is critical to note that if your account balance hits $10,000 for only one day (or one hour!) you must file FBAR.
The FBAR is filed each year by June 30th. Unlike your US Federal Tax Return, you cannot request an extension.
Filing the FBAR
In prior years, FBAR was filed via Form TD 90-22.1 and was mailed to the Department of the Treasury. But now, you are required to file electronically via FinCEN 114. Because it is not sent to the IRS, it is filed separate from your US tax return. This process is entirely online and more efficient than the old process.
The BSA E-Filing System is the new way to file. You can authorize a tax professional to file on your behalf, or you could file on your own.
When preparing on your own, you can choose how you want to prepare FBAR: with a PDF or online. With the PDF version, you can save as you go, complete it at your leisure. However if you have all of your documents in hand and are ready to file, it may be faster to submit it online. Either way you will get a signed copy to download for your records.
Before you file, you'll want to gather a few important pieces of information:
• Accountholder name(s)
• Name and address of foreign bank that holds the account
• Type of account (checking, savings, etc)
• Maximum value of the account(s) during the reporting period
Error-Proofing your Filing
Throughout the form there are required fields you must complete before submitting. It's also important to enter all information in the proper format to avoid getting your form 'kicked back.' Enter all phone and identifying numbers without any dashes or extra characters. For example, enter your phone number as 3313456464.
Since all balances must be reported in US dollars, you'll need to convert your balance prior to completing the FBAR. If you are looking for a good place to get an accurate exchange rate, try the Treasury's Financial Management Service rate (select Exchange Rates under Reference & Guidance at www.fms.treas.gov). There you can convert based on the exchange rate on the last day of the calendar year.
Even the best online processes have problems sometimes! The Frequently Asked Questions on the BSA E-Filing site are your best resource if you encounter an issue. Since the system has proven to be solid and there are no reports of widespread issues, chances are you can fix any errors on your own. If the Frequently Asked Questions don't answer your question fully, we highly suggest you contact an experienced tax attorney to discuss. The penalties for failing to file FBAR can be steep, so you will want to be 100% confident that you have filed correctly and accurately to avoid future issues.
This post was written by David McKeegan, co-founder of Greenback Expat Tax Services. Greenback specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and IRS Enrolled Agents who have extensive experience in the field of expat tax preparation. If you'd like Greenback to file your FBAR or your US expat tax return, simply click here to get started.
For more information about Greenback Expat Tax Services or filing your FBAR, please contact us or visit www.greenbacktaxservices.com.