If you are an American citizen or a U.S. expat, and meet a certain income threshold, then you are supposed to report your foreign bank account information to the US Treasury.
To report your taxes, you must file a form widely known as the Foreign Bank Account Report (FBAR).
The FBAR form in return addresses foreign non-US bank accounts to FinCEN form 114.
This is a bit difficult to comprehend, but you can find out more about FinCEN Form 114 in this blog.
Moreover, we have also discussed its potential uses, deadlines, requirements, and penalties.
What is FinCen 114 used for?
FinCEN (Financial Crimes Enforcement Network) is accountable for administering financial institutions in the United States, such as banks and other service companies.
FinCEN 114 implements this by documenting US expat foreign bank accounts if their accumulated bank account value crosses $10,000.
It is also important to note that despite being handled by the Treasury Department, the FinCEN form is legally not a tax form.
It does not result in taxes or amounts owed.
Furthermore, in contrast to the financial assets reporting form (8938), FBAR is mandatory to be filed even if a taxpayer is exempted from the filing obligation of (1040) because it also serves an informational purpose.
Also read: Form 8938 Vs. FBAR
Who is Required to File FinCEN 114?
To file FinCen 114, you should include information regarding all of your foreign financial accounts.
Below is a list of different types of foreign accounts that need to be reported for the purposes of FinCEN 114.
• Brokerage accounts
• Bank accounts
• Retirement accounts
• Other financial accounts
This also includes individual foreign account holders, joint foreign account holders, and US companies with foreign accounts.
If you are a US expat and your aggregate amount in your financial account exceeds $10,000, at any time of the year, then you are eligible to file FBAR.
Let’s take an example of an American resident living abroad, who held $4000 in a Canadian account, $3000 in an Australian account, and $5000 in a U.K. account; the total amount of all the foreign accounts would be above $10,000, and hence the person will be required to file an FBAR.
Filing Requirements for FinCEN 114
You will require the following details to complete the FBAR form:
- Your full name, SSN (Social Security Number), or ITIN, and address.
- Foreign bank details (account type, addresses, bank numbers).
- All your foreign bank balances
The form should be filled out completely and accurately, but there are some fields that are mandatory and are marked with an asterisk (*).
In addition to this, don’t forget to mention all your phone numbers and add phone numbers in a single text avoiding all other characters.
Deadline to File FinCEN 114
The FBAR deadline used to be June 30th with no exceptions, but it was amended to April 15th, to align with the deadline for filing the 1040 tax return.
However, since FBAR has been automatically renewed now, taxpayers are no longer supposed to file an extension.
Penalties for Not Filing
There can be several penalties for not filing an FBAR form.
- You may be subject to a $12,921 penalty for not filing FBAR. However, if there is a valid reason for not submitting and the account balance is properly recorded, this penalty is not applied.
- If any account or account number purposely failed to report then a penalty of around $129,210 is charged, or 50% of the present account at the time, when it was breached.
File your Foreign Accounts Today
It is always recommended to consult a professional CPA. The information mentioned here comes with the purpose to make you aware of your tax responsibilities.
However, this will never be a replacement for consulting a tax professional.
Consult a cross-border specialist today and file your taxes. It can save you money and time.
