Everything you need to know about the FBAR

If you are a US taxpayer living in a foreign country, you are a US expat. While you may have some leniency when it comes to filing taxes and tax credits,  as a US expat you still do need to file your taxes in a prompt and precise manner. That is why you do not face any repercussions due to tax filings, you have to be informed about the many factors of US expat taxes and tax requirements. One of which is the FBAR.

What is the FBAR?

FBAR is the Report of Foreign Bank and Financial account and is filed with the Financial Crimes Enforcement Network. It is a digital form and must be filled out online.

Who Needs to File an FBAR?

If you are a taxpayer who owns, has an interest in, or signature over, any financial account whose value equals or exceeds $10,000, then you need to file an FBAR. It is important to make note that the account doesn’t have to be YOUR account. If, for example, you have a signature over any overseas financial account, you can still be subject to filing an FBAR. And signature means basically you have a say and authority to control the funds, properties, and equities, in that account via communication with the owner or whoever maintains said account.

Keep in mind that filing an FBAR is separate from filing your taxes. In fact, you don’t file the FBAR with the IRS (Internal Revenue Service). You file the FBAR directly with the US treasury department.

What happens if you fail to file the FBAR?

You can face some pretty harsh penalties if you fail to file the FBAR. In fact, penalties for failure to file an FBAR can be worse than tax penalties. Depending if you knowingly or willfully failed to file an FBAR then, your penalty may vary.

For example, if you unknowingly fail to file an FBAR, or what is considered a non-willful violation, then you can face a civil penalty of $10,000. However, if you knowingly fail to file an FBAR or a willful violation, the penalty is greater than $100,000 or 50% of the amount in every account you have failed to file for. A very steep fine to pay for failing to file the FBAR.

But that is not all. You can face even harsher measures if you don’t file your FBAR. Criminal penalties for FBAR violations are even more frightening than civil penalties. Criminal penalties for FBAR violations can be a fine of $250,000 and 5 years in prison. This is because the FBAR violation occurs while violating another law, such as tax law, given the fact that you will most likely have some tax filing issues along with your FBAR violation. If that is the case, then the penalties skyrocket to a staggering $500,000 in fines and/or 10 years in prison. To put in perspective just how harsh these penalties are, many violent crimes are punished less harshly.

How To File an FBAR?

The FBAR is filed via the FinCEN 114 form, and it is done electronically on the BSA  e-filling site. If you have a tax authority doing your taxes for you, then you will have to grant them authority to do so using the FinCEN 114a form.

The form is pretty straightforward and requires a set of information on your end to fill out.  The FBAR form is due on Tax Day (typically April 15th), with an automatic extension of two months for US expats living abroad. There is also an extension available until October 15th.

It is important to stay up to date with your FBAR and make sure you file it on time.