As we get closer to the 2017 deadline for FBAR filing, here’s the rundown on what needs to be reported. Note that beginning this year, the deadline has moved up to 4/15 from 6/30, and extensions are now available to 10/15. Filing an extension for your tax return will automatically extend the FBAR filing date.
Treasury Department Form finCEN 114, Report of Foreign Bank and Financial Accounts (also commonly known as the Foreign Bank Account Report, or “FBAR”) is required to be filed annually by “each United States person having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country.” Let’s break this sentence down to determine what the requirements are.
What is a United States Person?
A United States person is any person that is a United States citizen or tax resident, and includes, individuals, corporations, partnerships, trusts or estates, joint stock companies, associations, syndicates, joint ventures, other unincorporated organizations or groups, Indian Tribes, and all entities recognized as legal personalities (including single-member LLCs that are otherwise disregarded for tax purposes).
What is a Financial Interest?
A person has a financial interest in an account if that person is the owner of record of, or holds legal title to, the account whether the account is maintained for his or her own benefit or for the benefit of others. The key is whether the account is maintained for the US person’s benefit. Therefore, even though the legal or owner of record may be another individual or a shell company, if the account is maintained for the US person’s benefit, that person has a financial interest in the account and is subject to the FBAR reporting requirements.
What is Signature or Other Authority?
A person is considered to have signature or other authority over an account if the person can control the disposition of assets in the account by direct communication with the institution with whom the account is maintained.
What Types of Financial Accounts are Required to be Reported?
Any financial account maintained in a geographic location outside of the U.S. is covered by the FBAR. A financial account includes the following:
Bank Account—a savings deposit, demand deposit, checking, or any other account maintained with a person engaged in the business of banking;
Securities Account—any account maintained with a person engaged in the business of buying, selling, holding, or trading stock or other securities;
Life insurance – An insurance or annuity policy with a cash value;
Brokerage – An account with a person that acts as a broker or dealer for futures or options transactions in any commodity or is subject to the rules of a commodity exchange or association; or
Mutual Funds – An account with a mutual fund, or similar pooled fund, which issues shares available to the general public that have a regular net asset value determination and regular redemptions. This definition excludes other joint investment arrangements such as private equity funds and hedge funds that do not meet these criteria.
Bonds and Stocks – Bonds and stock certificates individually held by a taxpayer are not financial accounts and do not need to be reported on the FBAR.
Safe-deposit Boxes – Safe-deposit boxes are generally not within the scope of the FBAR reporting requirements.
Debit cards and Pre-paid cards – Such accounts may be considered financial accounts and may be reportable on the FBAR.
Cryptocurrency – Bitcoin is considered by the IRS to be a “capital asset” like gold or silver. It does not need to be reported if it is directly held, but if it’s held through a platform like Coinbase or Bitstamp, it may be subject to FBAR reporting if the currency is stored on a computer or server located outside the U.S.
Other – Any account with a person that is in the business of accepting deposits as a financial agency; “Capital assets” such as foreign real estate and precious metals like gold and silver are not reportable on the FBAR if they are directly held. If your gold is located in a safe deposit box at a bank, then it’s reportable on the FBAR. But if your gold is located in a private, non-bank storage, such as a vault, then it might not be reportable on the FBAR as long as you own specific pieces of precious metals that are uniquely identified as belonging to you (e.g., serial numbers).
U.S. persons with one or more of the above types of foreign financial accounts are required to file an FBAR if their maximum aggregate value during the calendar year exceeds $10,000. Example, Bob has a foreign bank account with a maximum value of $5,000 and a foreign life insurance policy with a maximum cash value of $6,000. He is required to file an FBAR.