Ep 34: What Is English For "FBAR"?
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We discuss the FBAR (Foreign Bank Account Report) and why it is important to be aware of it.
It's a FORM that needs to be filed under the Bank Secrecy Act if you have a financial interest or signatory authority over a foreign financial account.
And the aggregate value of these accounts exceeds $10,000 at any time during the reporting year. The FBAR filing requirement applies to all types of financial accounts, not just bank accounts.
Failure to file the FBAR can result in substantial penalties.
Episode Links & Resources
Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.
The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.
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Manasa Nadig, EA (00:00:00)
have anything in click up I come up with it after the fact.
Jane Mepham (00:00:05)
And we are back with another Shortie episode. This is where we take a term used in cross -border space and we tell you what it is. Just give you a very high level definition. In today's episode, we're going to answer the question, what is the F BAR and why do I need to worry about the F BAR?
Manasa Nadig, EA (00:00:27)
Yes, so an FBAR basically is an acronym for Foreign Bank Account Regulations. So you have to file a form, FinCEN 114, under the Bank Secrecy Act to, in order to fulfill the requirements of the FBAR or the Bank Secrecy Act.
So basically, that's what it is. But what are these rules and regulations? So you fulfill these regulations if you have a financial interest or a signatory authority over at least one financial account which is located outside the United States. ⁓ And if the aggregate value ⁓ of
one or more than one of these foreign financial accounts exceeded $10 ,000 at any time during the calendar year that you're reporting for. So what is generally a financial institution, right? So this financial institution is one that's located outside the United States.
It doesn't matter whether the account actually produced any income or not. Just the fact that you have an account in a foreign financial institution outside the US means you have to have an F BAR requirement if the aggregate amount is more than $10 ,000. So that is what is an F BAR. Now, yeah.
Jane Mepham (00:02:16)
So I was going to say, one of the things that I find is people will say, okay, I own this account with my cousin or my sister, and it's not really my account. But as long as your name is on it, you do need to report. And I think cases where I've seen this happening, where folks do know, and this actually happened to me one time, is you're sending money to your sister or your brother or somebody for some, you know, how we send money for investments overseas.
And so you send the money in on that one day, the account is 10 K. Your brother or sister removes the money the following day because of the project you're working on. Guess what? You have an FBAR filing requirement, right?
Manasa Nadig, EA (00:03:04)
Yes, yes. ⁓ And remember, you have to go to the FinCEN website to electronically file this form. You cannot mail it ⁓ in to the authorities. ⁓ And FinCEN actually stands for the Financial Crime Enforcement Network. So that acronym in itself can be a little intimidating. But as long as you are fulfilling these requirements, you do not have to worry.
⁓ yeah.
Jane Mepham (00:03:34)
Okay, so what about if I have an account and I don't file?
Manasa Nadig, EA (00:03:41)
Well, if you don't, then there are penalties involved ⁓ and the penalties can get pretty substantive. And so you do not want to be remiss in reporting these accounts. And it doesn't matter where you live if you are a US citizen or a green card holder. So, you know, if you are living abroad and you're a US citizen or a green card holder, the F BAR filing
still applies to you. And think about it, the $10 ,000 threshold is really not a lot. If you live abroad and you conduct your life overseas, you could easily come under that. Yeah.
Jane Mepham (00:04:21)
⁓ And especially where they take, as you said, it's the combined balances of ⁓ all your accounts overseas. It's very easy to hit that number. You're right. Yeah.
Manasa Nadig, EA (00:04:34)
Exactly. And ⁓ speaking about all your accounts, the financial accounts that come under these regulations are not just your bank accounts. These could be your retirement accounts, your ⁓ life insurance policies, your investment accounts. So all of these financial accounts come under the purview of the F BAR. So this is definitely something that you have to remember.
that if you are a US citizen or a green card living abroad or living in the US, and if you're a tax resident of the US, means you could be on any non -immigrant visa, but as long as you have substantial presence and you're filing a regular 1040, then you need to file an F BAR if your thresholds are crossed. ⁓ And usually the due date for an F BAR is also April 15th.
But there is a automatic extension to file this to October 15. So if you miss filing the F BAR by April 15, then you have up until October 15. But there are no extensions after that. So if you did not file by October 15, then you are late. But you can still go ahead and file the F BAR, which you definitely need to do so as to not miss.
Bye for now.
Jane Mepham (00:06:05)
Okay, so I have now two more questions. ⁓ One, how do they know you have accounts overseas? That's one. And then two, a lot of times what I tend to see is people come and we start talking and I ask them about overseas accounts ⁓ and they're like, I didn't know was supposed to do this. And so you could have missed filing this for like the last three, four, five years.
Manasa Nadig, EA (00:06:09)
Mm -hmm.
Jane Mepham (00:06:31)
How do you go about that? Maybe go with the second question first. If you've missed it for that many years, what can you do?
Manasa Nadig, EA (00:06:39)
yeah, there are amnesty programs. And although people don't like to hear that word, but there are amnesty programs. So if you missed filing one year, two years, or how many other years, make sure that you either look this up or definitely talk to a tax professional who knows what they're doing and make use of one of these amnesty programs to streamline all of the missed years.
And do that as soon as you find out that you have missed filing. So there is a streamlined filing procedures for people who are living onshore, offshore, and a ton of those. So do check those out. And going back to your question, Jane, and you what? You always asked this question, right? How do they know? Well, yeah. So the United States has intergovernmental agreements.
Jane Mepham (00:07:30)
Yes!
Manasa Nadig, EA (00:07:36)
with other countries. ⁓ And what do these intergovernmental agreements do? They require financial institutions in other countries to report back to the US whenever there's a US citizen or a green card holder who is opening an account with them. So that's how they find out by the fact that this information is being sent back to the US.
Jane Mepham (00:08:06)
And to kind of add to that, ⁓ if overseas banks and financial institutions don't report, they end up getting charged. They could be liable for a penalty of up to 30 % of the account value. So it's in their best interest is what we've discovered for them to let IRS know, we think we have a US tax resident here and here's their information.
Hopefully they will let you know on their own. Okay, anything else we want to add to the F BAR or we answer the question?
Manasa Nadig, EA (00:08:43)
I think we covered it high level. ⁓ Definitely what is an F BAR, why is it needed, where do you file it, and what's the due date, and who is required to file. So I think that's a great Shortie we did today about F bars, and we did it under 10 minutes. And so we conclude today's Shortie. Please pass this on to anybody else that you think.
Jane Mepham (00:09:05)
You
Manasa Nadig, EA (00:09:12)
would benefit from this information. And as always, go to our website, theimcafe .com ⁓ and sign up to receive ⁓ our newsletter or the new episodes that drop every other Wednesday. Thank you. Bye.