Important June 30 Filing Deadline for U.S. Taxpayers with Foreign Accounts

If you had a foreign bank account last year, there is an important IRS filing deadline you need to be aware of.

If you are a U.S. taxpayer (including an individual, corporation, LLC, partnership, trust or estate) who had a financial interest in, or had signature authority over, one or more non-U.S. bank or financial accounts with a combined balance greater than $10,000 on any day during calendar year 2014, then you must complete the Financial Bank and Financial Account Reporting Requirement (FBAR) using FinCEN Form 114 (formerly TD F 90-22.1) by June 30, 2015.  

Penalties for Failure to File
A penalty of up to $10,000 for each foreign financial account not reported may be levied on U.S. taxpayers for a non-willful failure to file. In addition, significant civil, as well as criminal penalties, may result from failure to comply with the foreign financial account reporting requirements.

Definitions
The definition of a financial account for reporting purposes is very broad. It may include, but is not limited to, a securities account, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution. It may also include commodity futures or options account, an insurance policy with a cash surrender value, an annuity and shares in a mutual fund or similar pooled fund. Certain foreign retirement plans may also be included.

Particular attention should be paid to the definition of "financial interest" in determining who is required to file an FBAR, since it includes financial interests held indirectly. For example, if a U.S. individual owns more than 50 percent (by vote or value) of the shares of stock of a domestic entity which in turn owns more than 50 percent (by vote or value) of the shares of stock of a foreign entity, both the individual and the domestic entity are considered to have a financial interest in the bank accounts of the foreign entity.  Therefore, both the individual and domestic entity are required to file an FBAR to report the accounts.

Balances and Joint Owners

Each foreign bank or financial account, no matter how small the balance (including a zero balance) must be included on the FBAR Form 114 if the total of all accounts exceeds $10,000 on any day during 2014.  If you have more than one qualifying account, you will need to report each account on the Form 114.

If the foreign bank or financial account has more than one owner, each owner is responsible for filing FBAR Form 114. If a married couple owns a foreign bank or financial account jointly, the husband and wife may file one Form 114 if the names and social security numbers of the joint owners are fully disclosed. The spouse of an individual who files an FBAR is not required to file a separate FBAR if all of the financial accounts that the non-filing spouse is required to report are jointly owned and reported by the filing spouse on time. Otherwise both spouses are required to file separate FBARS in which each spouse must report the entire value of the jointly owned accounts.

If you are unsure whether your foreign financial account, or accounts, had a combined balance over $10,000 on any day during 2014, it may be prudent to complete and file an FBAR Form 114. 

Firm Deadline
Form 114 is informational only (no payment due), is filed separately from your tax return and information related to tax year 2014 must be received by the Department of the Treasury by June 30, 2015, with no opportunity for extension. Form 114 and instructions, including e-filing information can be found here.

The above information outlines the US Federal requirement to file Report of Foreign Bank and Financial Accounts (FBAR) related to the holding of a financial interest in, or signature authority over, defined foreign accounts. Contact your Eide Bailly service provider with questions related to the FBAR filing requirement.