Ep 34: What Is English For "FBAR"?
Listen & Subscribe
dark+apple dark+spotify dark+youtube
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.
Be sure to join the conversation by following us on social media:-
-
Speaker 1 (00:06):
Welcome to the International Money Cafe Podcast, the show where we filter out the noise on cross-border taxes, finances, and life in the us. I'm your host, Jen Hams, certified financial planner, founder and owner of elgon Financial Advisors,
Speaker 2 (00:21):
And I'm your host, man Nadi, enrolled agent, owner and founder of Amman Tax and Business Services. Join us on this journey as we explore the unique challenges faced by inbound outbound families and businesses on taxes, compliance, and financial planning. Let's get to the show
Speaker 1 (00:43):
And we are back with another shoddy episode. This is where we take a time 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 are going to answer the question, what is the FA and why do I need to worry about the fba?
What is the FBAR?
Speaker 2 (01:05):
Yes. So an F Bar basically is an acronym for Foreign Bank Account Regulations. So you have to file a form FI one four under the Bank Secrecy Act in order to fulfill the requirements of the fbar or the Bank Secrecy Act. So basically that's what it is.
What are FBAR Rules and Regulations?
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 are 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 they aggregate amount is more than $10,000. So that is what is an F bar.
Speaker 1 (02:50):
So 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 didn't know, and this actually happened to me one time, is you're sending money to your sister or your brother or somebody for some how we send money for investments overseas. And so you send the money and 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 F but filing requirement, right?
Speaker 2 (03:35):
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 FINON 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.
Speaker 1 (04:04):
Okay, so what about if I have an account and I don't file?
Speaker 2 (04:09):
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 REMI in reporting these accounts. And it doesn't matter where you live if you are a US citizen or a green card holder. So if you are living abroad and you are a US citizen or a green card holder, the FBAR filing requirements 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 into that.
Speaker 1 (04:50):
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 are right.
Speaker 2 (05:00):
Yeah, 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 10 40, then you need to file an fbar if your thresholds are crossed. And usually the due date for an FBAR is also April 15th, but there is a automatic extension to file this to October 15th. So if you miss filing the fbar by April 15th, then you have up until October 15th, but there are no extensions after that. So if you did not file by October 15th, then you are late, but you can still go ahead and file the fbar, which you definitely need to do so as to not
Speaker 1 (06:26):
Misfiling it. 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, oh, I did know I was supposed to do this. And so you could have missed filing this for the last 3, 4, 5 years. 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?
Amnesty Programs
Speaker 2 (06:59):
Oh 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 ever 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 mis 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 on shore offshore and a ton of those. So go do check those out. And going back to your question, Jane, and you know what? You always are asked this question, how do they know? Well, yeah, so the United States has intergovernmental agreements 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. And to Penalties
Speaker 1 (08:22):
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'll let you know on their own. Okay, anything else we want to add to the FPA or we answer the question?
Speaker 2 (08:57):
I think we covered it high level, definitely. What is an fbar? 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 shorty we did today about FBARs and we did it under 10 minutes. And so we conclude today, shorty, please pass this on to anybody else that you think would benefit from this information. And as always, go to our website, the im cafe.com and sign up to receive our newsletter or the new episodes that drop every other Wednesday. Thank you. Bye bye.
Speaker 3 (09:41):
Thank you for listening to the International Money Cafe podcast. The content is for informational and educational purposes only, and should not be used as a substitute for professional advice. Seek the advice of your qualified service provider with any questions you may have regarding your cross order finances and tax needs.