American expats and US persons must be aware that effective October 1, 2013 BSA FinCEN Form 114 must be filed with the Department of Treasury via its BSA E-filing System. FBAR Form 114 is an informational return only and there is no expat tax due with this form.
FinCEN Form 114 is the Report of Foreign Bank and Financial Accounts or so-called the FBAR. The FBAR Form 114 replaces the obsolete Form TD F 90-22.1.
U.S. persons with a financial interest in, or signature authority for, foreign financial accounts are required to file the FBAR if they meet the FBAR filing threshold.
The Internal Revenue Service (IRS) introduced FATCA form 8938 effective with a tax year 2011. To learn more about similarities and differences between FBAR Form 114 and FATCA, please read our detailed article.
Since we get multiple international tax questions from American expats about FinCEN Form 114, FBAR filing and penalties, we prepared a list of the top tax tips for American expats and US taxpayers.
Who must file FBAR FinCEN Form 114
American expats are not the only individuals that are subject to the FBAR filing requirements. US persons, in general, must file FBAR Form 114 if they meet the filing threshold and they have a financial interest in or signature authority for the foreign financial accounts.
US person is the following:
- U.S. citizens
- Green card holders
- U.S. residents
- Corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States
- Trusts or estates formed under the laws of the United States
What is the filing threshold for FBAR FinCEN Form 114
United States person must file the FBAR form 114 if the following criteria are met:
- American expat or US person has a financial interest in or signature authority over foreign financial accounts.
- And the aggregate value of foreign financial accounts exceeds $10,000 at any time during the calendar year.
For example, an American expat has a checking account in Spain with the highest balance of $6,000 in 2013 and another account in the UK with the highest balance of $7,000 during the year. In this case a US expat must file the FBAR FinCEN Form 114 because the total value is over $10,000.
Another example. American expat has only a signature authority over the company’s foreign account with the highest balance of $150,000. In this scenario this US expat must file FBAR Form 114.
What Is Foreign Financial Account For FinCEN Form 114
Foreign financial account is considered an account located outside of the United States. Accounts to be reported on FBAR FinCEN Form 114 include, but is not limited to:
- Deposit and custodial accounts held at foreign financial institutions. The list includes savings, checking, demand, deposit, time deposit, securities, brokerage or other account maintained with a financial institution.
- Financial account held at a foreign branch of a U.S. domiciled bank
- Foreign financial account over which an American expat or US person has a signature authority
- Indirect interests in foreign financial assets owned by an entity if American expat or US person has at least 50 percent interest
- Commodity futures or options account
- Shares in a mutual fund or similar pooled fund (for example, a fund is available to the general public with regular redemptions and regular net asset value determination)
- Foreign accounts held by foreign or domestic grantor trust for which an American expat or US person is a grantor
- Foreign-issued life insurance with a cash value
- Foreign annuity contracts
- Foreign retirement plan (a personal or individual account plan)
What Is FinCEN Form 114 Deadline
The FBAR Form 114 must be received by the Department of the Treasury by April 15 (starting with a tax year 2016). FBAR deadline is still June 30 for a tax year 2015. No extension is allowed for a tax year 2015.
The FBAR FinCEN Form 114 must be filed electronically through FinCEN’s BSA E-Filing System.
Which account information must be reported on FinCEN Form 114
When completing FBAR Form 114 (FinCEN 114), an American expat or US person must indicate the maximum value of all monthly account statements is required. Additionally, the following account details must be provided: account number, the name and address of as well as the type of the account. Other account holders that are associated with those accounts must be listed too.
For example, Part 1 on the first page of FinCEN Form 114 is used to report the taxpayer’s full name, the type of filer (individual, corporation, etc.), U.S. taxpayer identification number, and the date of birth for individual filers. Also, there are different sections like Part II and Part III to report the accounts owned separately and jointly. The form had different sections for reporting foreign financial accounts owned separately (Part II) and jointly (Part III). Both sections require the highest value of the account in U.S. dollars during the year, the type of account (like bank, securities, or other), the name and address of the foreign financial institution as well as the account number. In case of jointly owned accounts, the other joint owner information like the full name, taxpayer identification number and address must be listed. In case of late FBAR FinCEN Form 114, an explanation statement must be provided to avoid the automatic penalty assessment.
What are FBAR Penalties
The penalties for a failure to file FinCEN Form 114 are significant, to say the least.
- American expat or US person will be subject to $10,000 penalty if s/he is required to file the FBAR but failed to do so due to nonwillful violation. However, no penalty will be levied if an American expat has a reasonable cause and the account is accurately reported.
- American expat or US person will be subject to a civil monetary penalty of $100K or 50% of foreign assets owned in case of willful violation. US persons might be subject to the criminal penalty too.
American expats and US persons must be diligent about filing FinCEN Form 114 by June 30. The FBAR reporting is here to stay. Some expats argue that it has been in existence for a while and it might be discontinued since the introduction of the FATCA Form 8938. Unfortunately, this statement is far from being accurate. In April 2003, the IRS was delegated civil enforcement authority for the FBAR. Since 2003, the IRS has increased efforts to identify noncompliant taxpayers who have foreign financial accounts and have not filed a US tax return for a while too. Most American expats have been unaware about the US filing requirements and they are behind on their tax returns. International tax experts at Artio Partners will be pleased to assist with FinCEN Form 114 filing and past-due returns. To learn more, please click here.