Not So Fast! Tax Filing Season Isn't Over Yet For Those with Foreign Accounts

Posted on Mon, Jun 01, 2015 ©2021 Drucker & Scaccetti

It is well after April 15th and you’ve timely filed your returns or extended them to later in the year, but you may not be done with your tax filing obligation for the 2014 tax year.  If you have an interest in a foreign financial account, you may be required to file an informational return commonly known as the “FBAR” (Report of Foreign Bank and Financial Accounts) by June 30, 2015.  Unlike income tax returns, the FBAR may not be extended.  Failing to file this form could subject you to a $10,000 penalty! We certainly do not want that to happen to you, so here are a few things to know if you have foreign accounts.

 

Accounts Subject to Reporting

The definition of a financial account includes, but is not limited to, bank accounts, securities accounts, brokerage accounts, insurance policies with a cash value, annuity policies with a cash value, and shares in a mutual fund.

 

A foreign financial account is one that is physically located outside of the United States.  If your account is with a U.S. bank branch located outside of the U.S., the account is a foreign financial account.  If your account is with a foreign bank branch located within the U.S., the account is not subject to the FBAR filing requirements. 

 

Do You Have a Reportable Interest?

A U.S. person (which includes individuals and legal entities like corporations and partnerships) who has a financial interest in, or signature authority over, a foreign financial account must file an FBAR if the account exceeds the $10,000 threshold amount (described in more depth below).

 

A person has a financial interest in an account if he or she is the owner or holds legal title of the account, regardless of who the beneficial owner is.  An owner or holder of legal title includes: agents acting on behalf of a U.S. person for the account; a corporation that the U.S. person owns, directly or indirectly, either more than 50% of the total value of the stock or more than 50% of the voting power of the stock; a partnership that the U.S. person owns, directly or indirectly, an interest in more than 50% of the profits or more than 50% of the capital; a trust where the U.S. person is a trust grantor and has an ownership interest in the trust for federal tax purposes; a trust that the U.S. person has more than 50% beneficial interest in the assets or income during the calendar year; or any other entity that the U.S. person owns, directly or indirectly, more than 50% of the voting power, the total value of equity interest or assets, or interest in profits. 

 

A person has signature authority if they are able to control the disposition of assets by communicating to the financial institution maintaining the account.  It does not matter if the person holds the authority alone or with another person.  If you hold signature authority as an officer or employee of an entity, you may qualify under an exception to this broad definition.

 

Threshold Amounts 

If you have a reportable interest, you must file an FBAR if at any time during the previous year the aggregate value of the foreign accounts exceeds $10,000.  “Aggregate value” means all of your foreign financial accounts combined.  If at any time during the 2014 calendar year your combined foreign financial accounts reach a value of $10,001 or higher you must file the FBAR and report each of your foreign financial accounts.

 

How to File 

Foreign account information for calendar year 2014 must be filed online (there is no mail-in provision) by June 30, 2015.  Detailed information regarding all foreign financial accounts must be included.

 

Special rules exist for married couples and minors, so if you think you may have an FBAR filing requirement for 2014 or prior years, please do not hesitate to contact The Tax Warriors® at Drucker & Scaccetti.  We are always prepared to help you with this or any other tax-related matter.

Topics: deadline, June 30, foreign accounts, penalties, Treasury, Tax, IRS, fbar, FinCEN114

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