June is a busy month for taxpayers and tax pros alike. Nestled amid due dates for estimated tax payments and deadlines for taxpayers who were out of the country on Tax Day is one of the most overlooked dates for taxpayers: June 30.
June 30, just two weeks away from today, marks the due date for the Report of Foreign Bank and Financial Accounts – or as they’re more commonly known, FBARs (yes, I am aware that the acronym ought to be RFBFA but there you go).
The FBAR requirements (31 CFR 103.24) are part of the Banking Secrecy Act. Under the rules, each “US person” with an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in any foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $10,000. A “US person” generally means a citizen or resident of the United States, or a person in and doing business in the United States – it is not limited to individual taxpayers and includes partnerships and corporations.
In other words, if the total of your interests in all of the foreign accounts in which you have an interest reaches $10,000 or more at any point in the calendar year, you may need to file an FBAR. That applies even if you’ve been faithfully reporting the income on your federal income tax return and even if you’ve never, ever repatriated a single dollar to the U.S. It also applies even if the account produces no taxable income.
There are some exceptions to the FBAR reporting requirements, such as:
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over but no financial interest in a foreign financial account;
- Trust beneficiaries; and
- Foreign financial accounts maintained on a United States military banking facility.
To file an FBAR, check the appropriate block on your federal form 1040 at Schedule B, Interest and Ordinary Dividends (downloads as a pdf).
You’ll then file form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. (downloads as a pdf) It’s important to note that even though you must check the box on your 1040 to signify an interest in a foreign account, you don’t send your FBAR with your tax return. Instead, you file it with:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
The delivery messenger service contact telephone number: (313) 234-1062.
The FBAR has to be received on or before June 30th. This is different than the regular “mailbox rule” for tax returns that merely requires that a return be postmarked by the deadline.
Failure to comply with the rules can make you a criminal. Seriously. Failure to file an FBAR may, under the law, result in civil penalties, criminal penalties, or both (the list of potential penalties that may apply is distressingly long). It’s all very draconian but it’s also very real. And you should take it seriously.
If you’re not sure whether the FBAR rules apply to you, check with your tax professional. You can also contact the IRS directly by calling 800-800-2877 and selecting option 2 or emailing FBARquestions@irs.gov (questions only to this email address, the system doesn’t accept actual FBARs).