Thursday, 12 June 2014

Three things to know about the FBAR

FBAR is not part of a regular tax return sent to the IRS. Remember, FBAR does not cause a tax liability, but is for information reporting only. 
As a U.S. citizen, you may have to file an annual "Report of Foreign Bank and Financial Accounts" (FBAR) with the U.S. Treasury Department. Existence of such an account or accounts must be reported on schedule B of IRS form 1040, as well as interest earned from such accounts. Keep a copy of your FBAR, quarterly bank reports, and yearly reports of all other financial holdings. Make an appointment with us at GKM for more information on FBAR and our range of tax preparation & consulting services. 
The consequences for failing to file an FBAR when required can be drastic. It is critical to understand the extent of the filing obligation, governed by stringent rules & regulations. The official name of the FBAR has changed, from Treasury Form TD F 90-22.1 to FinCEN Form 114.
1.     If your foreign financial accounts totaled more than $10,000 last year, you need to file an FBAR by 30th of June
The Report of Foreign Bank & Financial Accounts (FBAR) is an annual disclosure form used to collect information from US citizens, residents & legal entities about their foreign financial accounts. If you have a financial interest in or signature authority over a foreign financial account and the total value of your foreign financial accounts exceeded $10,000 at any time during 2013, you must e-file this form with the US Department of the Treasury by June 30, 2014 (no extensions allowed)

2.     You need to report more than just foreign bank accounts
The FBAR reporting requirements apply to foreign bank accounts, brokerage accounts, mutual funds, life insurance or annuity contracts with a cash value, and certain other financial accounts located outside the US. They do not apply to domestic mutual funds that invest in foreign stocks & securities and certain other exceptions.

3.     If you fail to file an FBAR, you can incur significant penalties
The penalty may range up to $10,000 unless there is a reasonable cause for failing to file. If the failure to file is found to be willful, the greater of $10,000 or 50% of the accounts' balances and criminal penalties may be applicable.

The consequences for not properly complying with FBAR filing requirements can be severe. If you have foreign financial accounts or assets, please get in touch with international tax experts at GKM relating to your reporting requirements. 

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