A Guide to Foreign Bank Account Reports
Foreign Bank Account Reports
A quick and easy guide on everything you need to know about Foreign Bank Account Reports (FBARs)
FBARs, or Foreign Bank Account Reports, is an overview of your worldwide accounts that you are required to file if you're a United States resident and have accounts held in countries outside of the United States. They are required by law and by not filing, an individual could face fines and penalties from the Internal Revenue Service (IRS). This is the most common civil penalty dealt to citizens by the IRS and can rise to a maximum of $10,000 per account violation, per year. It is therefore of the utmost Importance you know how to file an FBAR, and if you need to file.
What is AN FBAR?
An FBAR is an overview of all the worldwide accounts you hold in a calendar year, they denote the highest figure you held in each account throughout the year at any given point.
They require the information on not just your accounts, but also any joint accounts, pensions, securities, business accounts, or any account that you are a signatory. This means even if you are in control over your child's account to save for them, it will need to be disclosed on your FBAR!
This isn't all that needs to be disclosed however, the full list of accounts is as follows;
- Bank, securities, financial instruments accounts.
- Accounts held in commingled funds (mutual funds) and the account holder holds an equity interest in the fund.
- Individually owned bonds, notes, stock certificates, and unsecured loans are not "accounts".
- Foreign life insurance or annuities with cash surrender value are "accounts".
- "Foreign" Online Gambling Accounts – IRS Says FBAR filing is required.
Who needs to file an FBAR?
If you are from the United States and your accounts have a combined total of over $10,000 You must file an FBAR by law or face fines from the IRS. If you move to another country but originated from the United States, you still must file an FBAR.
A lot of people are unaware of this and thus have missed years' worth of FBARs in the process, not purposely or with any intent, but purely due to a lack of knowledge. It is because of this, there is a method of filing known as the Streamlined Filing Procedure – This is where your FBARs from the past 5 years, including the current year (6 FBARs total) are filed all together, this issued to avoid penalties or fees for late filing or not filing at all.
Fbar Deadlines
The deadline for filing an FBAR is the following April the 15th, once the calendar year is finished, for example, the FBAR detailing accounts in 2016 would be due April 15th, 2017. If you do however miss this deadline, there is an automatic extension of 6 months, October 15th, which is automatically applied.
Common errors when filing FBARS
One common error when determining whether or not you are required to file is thinking that you are exempt from filing as none of your multiple accounts have had a value of above $10,000 individually. This is wrong, the $10,000 threshold is a threshold for the total of all foreign accounts you are linked with – So if you had 3 accounts that all have $9,999 each, you are still required to file.
Another common error is thinking you are not required to file because you have moved to another country, this is also incorrect, and you must still file an FBAR regardless.
Other mistakes involve an improper understanding of what accounts must and must not be disclosed on the FBAR or even using the wrong conversion rates or not using conversion rates at all and thus overestimating or underestimating your total values.
ANY QUESTIONS
We are very happy to help with any tax questions on moving to the UK and we can run through how to file your UK self-assessment tax return. Our friendly team of qualified tax advisers and accountants have specialized tax preparation experience to help international clients, non-domiciled and dual resident individuals in London, across the UK, and will walk you through what the next steps are – contact us today.