FBAR – what is it?
So, the FBAR… what exactly is it? With a formal name of FinCEN 114, it’s complicated instructions have resulted in it being one of the most widely searched US taxation terms, and also one of the most frequently understood.
An FBAR is required to be filed annually by any US citizen who holds non-US bank or financial accounts, subject to certain thresholds.
The term is an acronym for Foreign Bank Account Reporting, and the form itself does exactly that.
Put simply, the FBAR is not so much a tax related form, but rather an attempt by the Department of the Treasury to enforce its far-reaching anti-money laundering and financial crimes enforcement network.
Whilst the form is administered by the IRS, it has no bearing on your tax return. But anyway, lets talk about what the form actually consists of.
The FBAR (FinCEN114) is a basic form, listing bank account numbers, addresses, and maximum account balances in any one calendar year. This is all the information which is contained on an FBAR, aside from the basic information of the individual filing it (name, SSN etc.).
The FBAR gets filed annually to the IRS/Dept. of the Treasury, and is essentially used for data-matching with the information provided by banks around the world as part of the FATCA legislation.
The FBAR has existed in one form or another right back to 1970, but has been through many changes since then.
As we list the maximum value of each account for the year, it often brings up concern by our clients:
“but my actual wealth isn’t that high! I transferred money between accounts!”
This concern is a very common one, but we can assure you there is nothing to worry about. As the FBAR is not a tax form, there are no tax implications of the bank values, even if it appears that your wealth is far greater than it actually is. This is purely a reporting requirement, with the knowledge on the IRS side that account transfers have not been taken into account.
But, reading above, the form seems simple doesn’t it? Well, as with most forms related to the US, the instructions are made unnecessarily complex and difficult to understand. We cover that a little more in this page, What is a Financial Account?.
Most importantly for the FBAR is to ensure that it is filed every year, while it is time consuming, and an annoyance to many, the penalties for not filing can be severe.
If you’re unsure how to manage your FBAR filing, call us today and we’ll be happy to help.