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FBAR June 30th deadline - Deadline for Reporting Foreign Financial Interests

by
Bret Willoughby
on
6/8/2016
FBAR June 30th deadline - Deadline for Reporting Foreign Financial Interests

There is a little known tax reporting requirement that specifically addresses those who have or have signature authority over a financial account or accounts held in an institution located in a foreign country.

If you have a savings or checking account, a brokerage or deposit account, securities, a time deposit, foreign pension or even assets such as commodity futures, mutual funds or non-monetary assets such as gold valued in aggregate at over $10,000, the reporting requirement applies to you – and the deadline is fast approaching.

Commonly overlooked accounts include if you are a “signor” on your employer, your school or church account. If the “high-watermark” was just for a day you still have a reporting requirement.

The report is referred to as the foreign bank account report, or FBAR, and in order to comply you need to file FinCEN Form 114 on or before June 30 of this year for accounts held during 2015. The requirement applies to every U.S. resident or citizen with authority over any foreign financial accounts, and this is true whether you know about the account or not.

That means that if you have relatives living abroad who have added your name to their account worth more than $10,000– even if it is just as a protective measure in case something happens to them – then failure to report the asset can result in significant fines. The same is true if you have unwittingly established an account at an online casino that is based overseas – if at any point during the course of the year, your account’s value exceeds the FBAR threshold, then it needs to be reported. 

Many people hear about the FBAR requirements and become concerned about mutual funds that may invest in foreign stocks. As long as the financial institution in which your funds are held is located in the United States, then you have no reporting requirement; the same is true for a foreign bank that has a branch located in the U.S. and that is where you do business.

However, if you have an account at a financial institution that is located out of the country, and it is through the foreign location that you administer your account, then you need to submit the appropriate forms.

Failure to file FinCen Form 114 is an expensive proposition. The government provides no extensions beyond the June 30th deadline, and failing to log on to the Financial Crimes Enforcement website and submitting it can lead to a penalty as high as $10,000 when the violation is considered “non-willful”.

For willful violations the government exacts even harsher penalties – either 50% of the balance of the account at the time of the violation, or $100,000 — whichever is more. 

Beyond the FBAR requirement, there are other filings that are needed if your foreign holdings reach a higher level. For those who are living in the US, married and have a spouse with whom they file a joint return, when foreign financial assets are more than $100,000 at year’s end – or reach $150,000 at any point throughout the tax year – then Form 8938 needs to be filed.

The form should be submitted by the deadline – including extensions - of your income tax return. U.S. citizens or residents who are living abroad have higher thresholds of $400,000 at year’s end and $600,000 at any point during the year. For those filing single, head of household, or married filing separately, the thresholds are half of those levels. Stiff penalties exist for failing to file form 8938 also – There is a fine of $10,000 per year of non-compliance, and if the IRS issues a notice of your failure to file and you don’t respond or submit the file, then at the 90-day mark the amount of the fine can increase to $50,000. 

If you believe that you were supposed to have filed Form 8938 with your income tax return and you failed to do so or have a requirement to file the FinCen Form 114, it is important that you take action immediately.

The Expat tax professionals at our office are available to assist you in avoiding a negative outcome, as well as in understanding what your requirements are. Contact us as soon as possible, as the June 30 deadline is fast approaching. 

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Bret Willoughby

Bret Willoughby

Bret Willoughby is a practicing tax preparer for expats throughout the world. He created Providence Payroll to meet the needs of Churches, not-for-profit organizations and businesses with remote workers. His web-based payroll processing service benefits both employers and remote workers with an easy way to access payroll information. Clergy have unique payroll and tax-related issues, one that Providence Payroll is qualified to manage.

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