Report of Foreign Bank and Financial Accounts (FBAR), also known as Fin CEN Form 114, is required to be filed for each U.S. entity and individual who has financial interest in, or signature or other authority over, foreign financial accounts that have aggregate value exceeding $10,000 at any time during the calendar year.
FBAR is a disclosure form filed with the U.S. Treasury. There is no tax due with filing of the form. Any income generated by the financial accounts that are reportable on the FBAR, may be required to be reported on the taxpayer's annual income tax return with tax paid thereon.
FBAR reporting is required when a taxpayer has an interest in or authority over foreign financial accounts with aggregated value of more than $10,000. It makes no difference that each single foreign financial account has a balance of less than $10,000 or the account was closed during the year. If the aggregated account balance is more than $10,000 at any time during the year, the taxpayer is required to file an FBAR reporting all these accounts. It is important to note that CFOs, management and someone in the accounting department of a company with foreign operations, may be required to file an FBAR due to their authority over foreign financial accounts owned by the company they work for. These individuals would be subject to the same penalties described below for failure to file the required FBAR, even though they have no financial or beneficial interest over these accounts.
Penalty for failure to file an FBAR starts at a minimum of $10,000 per violation. If the U.S. Treasury determines that the failure to file is willful, the penalty is the greater of $100,000 or 50% of the amount in the account at the time of violation. Willful violation may also subject the taxpayer to criminal prosecution. There is no minimum age limit for FBAR filing, so minors with foreign financial accounts are also subject to the filing requirement.
Unfortunately, due date of the FBAR cannot be extended for the 2015 reporting year. For the 2015 reporting year, the FBAR is due on June 30, 2016. It is imperative that FBARs are electronically filed no later than June 30th to avoid penalties.
If you need assistance with the FBAR filing or have questions regarding foreign disclosures, please contact Liting Chuang, Principal and Leader of the International Consultancy Group at Berntson Porter, at 425-454-7990 or lchuang@bpcpa.com.
