FBAR financial filing is a word that commonly crops up when there is talk of filing tax returns. However, not many people know the fact that the FBAR financial filing is for those US citizens who have some money in offshore accounts.
Also known as Foreign Bank and Financial accounts reporting, it is a special reporting requirement for those who have money in other countries apart from the USA. Moving on, we give you more information about FBAR financial filing and who needs to apply for it.
What is an FBAR filing?
An FBAR is your Foreign Bank account report and is often called the FinCEN for 114. In case you fall in the same category of filers, you have to submit it yearly. Usually, you have to file this report to show that there is no tax evasion on your part. In this case, you have to clearly mention all the assets you have in any of the foreign banks.
Instead of filing with the IRS, you have to submit an FBAR with the US treasury’s Financial crime and Enforcement network. In any situation, if you fail to file the report, you may have to pay severe penalties later on. FBAR Attorney Nick Oberheiden guides you into FBAR filing and paves the way for the smooth operation of the process.
Apart from reporting the balance in your account, you should also furnish the following details.
- Foreign assets like stocks you hold in a foreign financial organization
- Assets in a foreign branch of a US financial firm
- Foreign mutual funds or Life insurance policies
Who Needs to File an FBAR?
Whether you live in the US or any other country, you have to file the FBAR in case you have some balance in your accounts abroad. If the total balance of your foreign accounts is more than $10000 at any point in time, you must fill the form. Foreign financial accounts will include bank accounts, securities accounts, and any foreign retirement arrangements you have made.
Any bank accounts you have that are located outside the 50 states of the USA and tribal regions also will fall under this category. Nostro accounts or accounts held by government entities will mostly not fall under the requirement. However, it is always better to clarify before starting.
In case you are a US expat, then you have to fill in some other forms apart from the FinCEN 114. This includes Schedule B, Form 8938, and part three of your tax return. Remember that filing form 8938 does not affect your need to fill the form Fin CEN 114.
How to File an FBAR?
The FBAR or FinCEN 114 form is filed electronically through the website e-filing system. You can either do it yourself or take the services of a professional to do it for you. Married taxpayers should be aware that you might not be allowed to file a joint FBAR form. Only if you have a joint bank account, then you can get permission to file a joint FBAR. Otherwise, it is an individual filing only.
- Go to the BSA e filing system and register for it.
- Next, find the File online FBAR section and move to it.
- Go to the Prepare and submit button.
- There will be a section for EIN where you mention your TIN or SSN.
- Complete all the sections of the form correctly. Check whether you have filled the mandatory sections.
- Review all the information once more.
- Click on the “Sign the form” button and press the submit button to finalize your entry.
Penalties for not Filing an FBAR
It is not wise to not file your FBAR, especially if you have accounts in other countries. Failure to submit the required information can lead to strict actions against you. If the IRS feels that you have mistakenly not paid your taxes, you might get an exemption from the penalties.
In case you have not filed the FBAR for many years and did not have an idea that you should file, you may still file for the amnesty program. However, you would have to pay three years of delinquent tax returns and six years of FBAR’s to avail of this facility.
But if you have willingly ignored the FBAR, you will have to pay a hefty penalty. In most cases, the amount can go up to $100,000 or approximately 50% of the balance present in your account. Non-wilful violations that do not have a substantial reason can be imposed a penalty of around $10000.
However, this is only just the beginning. If the IRS gets offended or finds you avoiding the taxes due to some criminal intent, you could go behind bars. The fine, in that case, could go up to $250000, along with a jail term of around 5 years.
In case the FBAR violation happens along with a Tax violation, the situation worsens for you. The penalties now can go up to $500000, and jail term increased to around 10 years. Before applying any penalties, the IRS goes through a lot of details. This includes inheritance details, other account information, and financial history. You can easily file the FBAR even after the due date is over; the penalties imposed are totally out of your reach.
Any kind of money kept in foreign accounts should be informed through the FBAR filing. However, the actual filing of the same can be slightly confusing. If you are also in two minds about it, look for some professional help.
Remember that if you ignore the payment, the penalties imposed are rather scary. You would not want to get trapped in any form; therefore, filing the information is the best bet.
Look for an FBAR attorney who has a fair idea of the technicalities behind the IRS and the penalties it could apply to you. FBAR attorneys know the exact manner in which the procedure of filing should be completed.
With their assistance, your FBAR filing happens smoothly, and all the headers are duly paid for and mentioned.