FinCEN Form 114 – FBAR- Report of Foreign Bank and Financial Accounts
FinCEN Form 114 – Report of Foreign Bank and Financial Accounts – is governed by Department of Treasury Regulations Title 31- Code of Federal Regulations (CFR) 1010.350- Money and Finance.
WMinorsho Must File FinCEN Form 114
All United States (U.S.) persons (Definition under IRC Sec 7701(b)) having a financial interest in or signature authority over any foreign (non-U.S.) financial account(s) with aggregate (not individual) fair value balances exceeding $10,000 USD at their individual highest point in the calendar tax year, must report such relationships to U.S. Treasury by e-file on FinCEN Form 114.
A person may be an individual (even minors) and legal entities including but limited to a Limited Liability Company (LLC), a Corporation, a Partnership, a Trust and Estate.
An individual person also includes minors, who are also responsible for filing FBARs. If the minor cannot file his or her FBAR for any reason the minors parent(s), guardian or other legally responsible person must file and sign it on behalf of the minor
Foreign – Non-U.S. for Purposes of FinCEN filings
For FinCEN Form 114 FBAR reporting and disclosure purposes, the United States includes the 50 States, District of Columbia, all United States territories and possessions (e.g., American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the United States Virgin Islands), and the Indian lands as defined in the Indian Gaming Regulatory Act.
A Foreign Account includes an account located outside of the U.S. As an example if the account is with a branch of a U.S. bank but is physically located outside the U.S, then the account it is a Foreign Account for FBAR purposes. Conversely an account of a foreign bank maintained at a branch physically located within the U.S is not a Foreign Account for FinCEN FBAR purposes.
What is the FinCEN Form 114 Due Date
The FinCEN Form 114 FBAR due date is the same due date as the individual income tax return Form 1040 tax return, the FBAR must be received by the Department of Treasury on or before April 15th of the year immediately following the calendar tax year being reported, that is every succeeding filing tax year.
FinCEN Form 114 – Extension Due Date
The FinCEN Form 114 is automatically extendable for a six-month period of time to October 15. FinCEN has announced that there is no need for a specific automatic 6-month extension request using a specified form.
What is a Financial Interest
A Financial Interest is defined as the owner of record, holder of legal title, even if held for the benefit of other persons.
The owner of record or legal title maybe:
- an- agent or nominee,
- for a Corporation or Partnership- a direct or indirect ownership where the shareholder or partner owns 50%+ by value/vote, profits/ capital of any corporation or partnership respectively and
- for a Trust- where the person a) is the trust grantor, b) has an ownership interest in the trust, c) where a person has greater than a 50% present beneficial interest in the assets or income of the trust for the calendar year.
What is a Foreign Account
A Foreign Account includes but is not limited to- any:
- Foreign bank- savings, checking, demand, deposit or time deposit account, or
- any securities or brokerage account- including a commodities, futures or options account,
- any Foreign retirement or pension plan accounts, iv) any Foreign insurance policy or annuity policy with cash surrender value, v) a Foreign account with gold bullion
However, a Foreign Account for FBAR purposes is not a Foreign Defined Benefit plan or Employer Sponsored pension plan.
A Foreign Account comprises even negative or loan accounts though they are stated at NIL value- this includes mortgages, personal LOC’s and credit cards.
FinCEN Form 114a- Record of Authorization to Electronically File FBARs
When FinCEN Form 114 FBARs are complete and finalized for third party transmission a Form 114a must be completed and kept on file by the practitioner
This form is not sent to FinCEN but serves as a general acknowledgment of consent to file.
Structure of FinCEN Form 114
FinCEN Form 114 is separated into five parts: Part I- Filer Information, Part II- Information on Financial Accounts(s) Owned Separately, Part III Information on Financial Account(s) Owned Jointly, Part IV- Information on Financial Account(s) Where Filer has Signature or Other Authority but No Financial Interest in the Accounts(s) and Part V- Information on Financial Account(s) Where the Filer is Filing a Consolidated Report.
Penalties for Failure to File- Non-Willful/ Willful-
FinCEN Form 114 FBAR penalties for failure to disclose the required information to U.S. Treasury may by the date due, may result in civil penalties for non-willful violations of $10,000 per account per annum, and willful violations the greater of $100,000 or 50% the value of the account and may include criminal prosecution.
Tax Education is a Top Priority
At Protax, we are dedicated to educating our clients. We want them to be kept aware of U.S. tax laws affecting the amount of income tax they will pay, as well as the developing and constantly changing laws of U.S. taxation.
We invest the time and resources to meet with our clients as often as required to ensure maximum optimal tax savings mechanisms are in place.
These highly complex tax filings involve intricate terminology and Internal Revenue Code sections not understood by the majority of CPA practitioners, let alone average taxpayers. Therefore, only competent international tax CPAs should attempt these filings. Protax has an extremely qualified staff on hand year-round and also offers excellent articles on this website that will help explain these intricacies in more detail for U.S. expatriates.
We can advise you as to the applicable tax laws and regulations directly affecting you and we will consult with you on the preparation of your U.S. tax return Form 1040, Form 2555- Foreign Earned Income and Form 1116 – Foreign Tax Credit, as well as any required state tax filings all via electronic communication and the telephone and / or facsimile, where the situation precludes a one-on-one meeting.
Please contact us for a free consultation and for further details.