One week from today is the tax filing deadline. It’s also the effective deadline for filing the Report of Foreign Bank and Financial Accounts, FINCEN Form 114; that’s the form that’s better known as the FBAR. The FBAR is part of the Bank Secrecy Act (it’s not a tax form), but tax professionals like me get the joy of preparing the form. There’s no tax due with filing the FBAR–it’s an information return. Yet I regularly hear excuses on why not to file the form.
You are required to file the FBAR if you have $10,000 aggregate at any time during the previous year in one or more foreign financial accounts. These include the obvious (non-US bank accounts and non-US brokerage accounts) to the not so obvious (most online gambling accounts). Penalties for not filing the FBAR are stiff (to say the least). Non-willful penalties begin at $10,000 while willful penalties start at the greater of $100,000 or half the balance in the account—yes, that penalty is per account.
The FBAR must be electronically filed. Most tax professionals’ software will handle filing the form. You can also do it yourself on the BSA E-Filing System. And if you have an FBAR filing requirement, you may also need to file Form 8938 with your tax return. This is essentially a duplicate of the FBAR but with different filing thresholds and slightly different accounts that must be reported. (The IRS has a good webpage on the differences between the FBAR and Form 8938 filing requirements.)
The rule of thumb with the FBAR is simple: When in doubt, include the account. There are no penalties for overreporting; there are severe penalties for underreporting. Take foreign cryptocurrency exchanges. The IRS has publicly stated that these do not have to be included on the FBAR. However, the instructions to the FBAR don’t say that. Thus, I urge individuals to include them. I maintain a list of foreign online gambling sites and cryptocurrency exchanges.
So don’t forget the FBAR when you’re filing your taxes. And if you have any doubts on whether to include that account, include it.
Tags: FBAR