IR 2019-63, 4/4/2019; Fact Sheet 2019-7
IRS has issued a news release and fact sheet that contain numerous reminders for taxpayers with foreign bank or financial accounts, including the fact that the annual Report of Foreign Bank and Financial Accounts (FBAR) is due on Apr. 15, 2019.
Background. U.S. citizens and resident aliens are legally required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers (i.e., U.S. citizens and resident aliens with worldwide income subject to the reporting rules) will need to fill out and attach Form 1040, Schedule B, Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds $50,000 on the last day of the tax year, or $75,000 at any time during the tax year.
Separately, certain taxpayers with foreign accounts during 2018 must file a Financial Crimes Enforcement Network (FinCEN) Form 114 (FBAR) with FinCEN, a bureau of the Treasury Department. It is not a tax form and cannot be filed with IRS. The form generally must be filed electronically and is only available online through the BSA (Bank Security Act) E-Filing System website. In general, the filing requirement applies to anyone who had an interest in, or signature or other authority over, foreign financial accounts the aggregate value of which exceeded $10,000 at any time during the calendar year. FBAR filing deadline.
FBAR filing deadline. The filing deadline for the FBAR is Monday, Apr. 15, 2019. FinCEN grants filers missing the Apr. 15 deadline an automatic extension until Oct. 15, 2019 to file the FBAR.
Other reminders. The IRS news release and fact sheet provide additional reminders, including the following:
…Filing rules, generally. Taxpayers don’t file the FBAR with individual, business, trust or estate tax returns. Taxpayers who want to paper-file their FBAR must call the Financial Crimes Enforcement Network’s Regulatory Helpline to request an exemption from e-filing.
…Jointly-owned accounts. Except as provided below, if two people jointly own a foreign financial account, or if several people each own a partial interest in an account, then each person has a financial interest in that account, and each person must report the entire value of the account on an FBAR.
There is an exception for spouses. Spouses don’t need to file separate FBARs if they complete and sign Form 114a, Record of Authorization to Electronically File FBARs, and:
- All reportable financial accounts of the nonfiling spouse are jointly owned with the filing spouse, and
- The filing spouse reports all accounts jointly-owned with the nonfiling spouse on a timely-filed FBAR.
Otherwise, both spouses must file separate FBARs, and each spouse must report the entire value of the jointly-owned accounts.
The e-filing system will not allow both spouses’ signatures on the same electronic form – only the filing spouse signs in the system. Taxpayers don’t submit Form 114a with the FBAR; they keep it for their records.
…Children. Generally, a child is responsible for filing his own FBAR. If a child can’t file his own FBAR for any reason, such as age, the child’s parent or guardian must file it for him. If the child can’t sign their FBAR, a parent or guardian must sign it.
…Accounts not reported on FBAR. Individuals don’t need to report foreign financial accounts held in individual retirement accounts and tax-qualified retirement plans on the FBAR. IRS’s publication, “The FBAR instructions” lists other exceptions.
…How to report the value of foreign financial accounts. FBAR filers need to reasonably figure and report the greatest value of currency or non-monetary assets in their accounts during the calendar year. They may rely on their periodic account statements if the statements fairly show the greatest account value during the year.
Filers figure the greatest value in the currency of the account. If not already in U.S. dollars, they convert that value into U.S. dollars using the Treasury Bureau of the Fiscal Service exchange rate on the last day of the calendar year. If the Treasury Bureau of the Fiscal Service rate isn’t available, they may use another valid exchange rate and give the source of the rate. For example, the value of an account located in Japan may be shown on the account statements in Japanese yen. Filers would figure the greatest value of the account in yen and then convert it into U.S. dollars.
…Amending an FBAR. Those who need to correct a filed FBAR must file a new FBAR with the corrected information and mark the new FBAR as “Amended.” They should fill it out completely, even fields that don’t need correction. They can e-file the amended FBAR using the BSA E-Filing System or paper-file it with an e-filing exemption from FinCEN.
Taxpayers that e-file the amended FBAR check the “Amended” box on FinCEN Form 114. The Prior Report BSA Identifier field will activate, and they’ll enter the BSA ID number from the original FBAR. If they e-filed the original FBAR, they’ll find the BSA ID number in the acknowledgement email FinCEN sent to them. If they can’t locate the BSA ID number or if they paper-filed the original FBAR, they need to enter all zeros in the Prior Report BSA Identifier field.
…Filing late FBARs. A U.S. person who learns that he should have filed an FBAR for a previous year should electronically file the late FBAR as soon as possible. The BSA E-Filing System allows him to enter the calendar year he is reporting, including past years. It also offers him an option to explain the reason for the late filing or show if it’s part of an IRS compliance program.
…Penalties for failure to file an FBAR . Those who don’t file an FBAR when required may be subject to significant civil and criminal penalties. Criminal violations of FBAR rules can result in a fine and/or five years in prison. The U.S. government adjusts the penalty amounts annually for inflation.
IRS will not penalize those who properly report a foreign financial account on a late-filed FBAR if IRS finds they have reasonable cause for late filing.
…Recordkeeping. Those who must file an FBAR must keep records of accounts for generally five years from the FBAR due date, including:
- Name on each account,
- Account number or other designation,
- Name and address of the foreign bank or other person who keeps the account,
- Type of account, and
- Greatest value of each account during the reporting period.
They should also keep copies of filed FBARs.
Officers or employees who file an FBAR to report signature authority over an employer’s foreign financial account don’t need to personally keep records on their employer’s accounts.
References: For reporting requirement for individuals with foreign assets, see FTC 2d/FIN ¶ S-3650; United States Tax Reporter ¶ 60,114.
