As the FBAR deadline approaches, here’s what you need to know
U.S. citizens and permanent residents with bank accounts abroad may have to report those accounts to the U.S. government by June 30, 2014. The report is on form FinCen 114, titled the Report of Foreign Bank and Financial Accounts, sometimes called the FBAR. Many U.S. citizens and permanent residents have questions about their FBAR requirements. Hopefully, the answers below will help illustrate what is necessary.
Who needs to file an FBAR?
Answer: Any “U.S. person” with financial interest in or signature authority over bank or financial accounts located outside of the United States, if the value of the accounts exceeded $10,000.00 at any time during the year.
That’s a bit of a mouthful. Can we break that down a bit? What is a “U.S. Person?”
Answer: A U.S. person, for the purposes of the FBAR, means a U.S. citizen, a U.S. resident, or a domestic partnership, corporation, truest or estate.
What is the difference between a “financial interest” in an account, or “signature authority” over an account?
Answer: A financial interest in an account typically means ownership in the account. Your own personal bank account is an account you have financial interest in. If you own an account jointly with your spouse, you both have a financial interest in the account. A person with signature authority in an account can distribute money from the account, even if the person doesn’t own the account. An example of this would be someone who works for a business or charitable organization who is authorized to sign checks from the company bank account.
The rules get more complicated if a title to an account is held by an agent, attorney, corporation, partnership or trust. If you fall into one of these situations, discuss things with an adviser.
I have two accounts. None of them ever have $10,000.00 in them. Do I need to file an FBAR?
Answer: Maybe. That’s where the “aggregate value” comes in. Aggregate value simply means we add the values of all your accounts together. Imagine that you have two accounts outside the United States, and each has $5,000.50 at the same time during the year. When these accounts are added together, they exceed $10,000.00, and an FBAR is required.
I have accounts with Citibank in Costa Rica. Does this count as a foreign financial account even thought Citibank is a U.S. Bank?
Answer: Yes, the law states that any financial account located outside of the U.S. must be reported, even if held at a branch of a U.S. institution, such as Citibank.
What happens if I just decide not to do this?
Answer: The IRS does not always impose the maximum penalty, but they are authorized by law to charge you a $10,000.00 penalty for each violation. If they decide it’s a willful violation, they can go after 50 percent of the value of the account for each year it is not reported. In some cases, this can get into the millions.
Is this new? Did Obama do this?
Answer: The FBAR comes from the Bank Secrecy Act, which was passed by congress in 1970 and signed into law by Richard Nixon. However, another confusing bank reporting law called FATCA was passed in 2010 and signed by the current president.
Ross Lustman is an attorney and enrolled tax agent with U.S. Tax and Accounting, S.A. He lives in Costa Rica and offers tax services for expats. Reach him at firstname.lastname@example.org.
You may be interested
Experts urge action to reduce inequalities of black Latin American populationAFP and The Tico Times - October 15, 2019
Latin American authorities and specialists urged Tuesday in Costa Rica for countries to adopt strategies to eliminate the inequalities that…
Watch: Police chase interrupts video crew filming in San JoséAlejandro Zúñiga - October 15, 2019
A video shot at Costa Rica's Parque de la Democracia in San José has gone viral. If you haven't watched…
What’s the difference between a green alert and a yellow alert in Costa Rica?Alejandro Zúñiga - October 15, 2019
The National Emergency Commission (CNE) in Costa Rica frequently issues green and yellow alerts for parts or all of the…