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International Tax
Foreign Bank and Financial Accounts (FBAR)
The IRS requires that a FBAR be filed by any U.S. persons with a financial interest in, or signature or other authority over, financial accounts in a foreign country that have combined value that exceeds $10,00 during a calendar year. This includes bank accounts, brokerage accounts, mutual funds, unit trusts, annuities and “other foreign financial accounts”. The reporting obligation applies even if the account produces no taxable income.
The key words here are “other foreign financial accounts” because these accounts may be difficult to determine. For example, they may include life insurance and annuity policies. It is critical that you have a knowledgeable tax expert such as Esquire Group to help in the determination of your filing requirements. It is also important to note that the filing requirement obligations extend to the holders of shares of foreign mutual funds or similar pooled funds that are available to the general public and have regular net value determination and regular redemptions.
Additionally, when a person has signature or other authority over an account in order to control disposition of assets, that person, along with the corporation itself, will be required to file an FBAR.
The requirement for the FBAR stems from the fact that foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. With this in mind, the FBAR is used as a tool to assist the U.S. government in identifying persons who may be using foreign financial accounts to avoid U.S. laws and regulations. FBARs are used by investigators to locate or identify funds that have been used for illegal purposes or to discover unreported income made or held in a foreign jurisdiction.
The FBAR is not filed with the filer’s Federal income tax return and no extensions to the filing are granted. It must be received by the IRS on or before June 30th of the following year. Account holders who do not abide by the FBAR filing requirements may be subject to civil or criminal penalties, or both. There are exceptions to the FBAR filing requirements that may apply to your circumstances.
Esquire Group will be able to help you in the determination of your filing requirements and ensure that your forms are filed in a timely manner.
