Foreign Bank Accounts Requirement - Tax Mediation Services
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If you work or live abroad then you are likely to have a foreign bank account as well. Many taxpayers are unaware of the fact that they need to make a disclosure of such financial interests or assets held abroad. Along with reporting one’s income and deductions or tax credits for income tax calculation. Tax payers with an interest in or with a signature authority over foreign financial accounts held abroad which exceed the threshold of income set by the IRS are under a filing requirement.

  • FBAR

FBAR stands for the Report of Foreign Bank and Financial Accounts according to the IRS. The government uses the FBAR to identify persons who have set up foreign accounts to avoid paying taxes on their income. The requirement of submitting an FBAR Form is not included in the income tax returns filed. It must be submitted through the FBAR Form 114 separately. You must directly submit it to the Financial Crimes Enforcement Network (FinCEN). The BSA E-Filing System websitehas this form available and it can only be submitted electronically.

  • People who need to file the FBAR

According to the IRS, taxpayers who may have an interest in, or are authorized signatories over foreign financial accounts and if their combined value exceeds $10,000 during the given tax year must file the FBAR. To know more about the filing requirements for the FBAR one can visit IRS.org.

  • What to include on the FBAR?

You need to include foreign financial accounts:

  1. That you own.
  2. That your spouse or civil partner owns if you are married and are filing jointly.
  3. That you jointly own with a third party.
  4. That you are an authorized signatory to.

However it is not just the bank accounts that you need to include. It could also be a brokerage account that you hold abroad, a mutual fund held overseas, a trust or any other foreign financial accounts held by you in another country.

  • What can you leave off of the FBAR?

There are a few exceptions to everything that needs to be included on the FBAR. These are:

  1. An account that is held at a foreign branch of a bank in the US.
  2. An account that is held at a US branch of a foreign bank.
  3. Pension accounts.
  4. Real estate held abroad.
  5. Social securities held abroad.
  • FBAR Filing Deadline

As a taxpayer in the US you must be familiar with the tax deadline of April 15th. But if you fall under the FBAR requirement there is another important date to remember.

The FBAR deadline as of the tax year 2016 is also April 15th but to avoid the confusion you must think of them as a separate date.

  • People who need to file Form 8938 as well?

Taxpayers with specified foreign financial assets that exceed certain thresholds must also report those assets on the IRS 8939 Form. While this is a duplication of the assets reported earlier. It still does not relieve you of the requirement. You need to file for FBAR Form 114 and the IRS Form 8939 separately.

 

 

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