The general rule is that a Foreign Bank Account Report (FBAR) must be filed if the aggregate value of the taxpayer’s foreign accounts exceeded $10,000 at any time during the year. This requirement seems simple, but there are some important details to consider when deterring if you need to file an FBAR and when actually filing the form.
Which Accounts to Report?
If you have a filing requirement, you must report all of your foreign accounts. You can’t just report the ones that exceed $10,000 during the year.
If you are the account owner and have the power to withdraw or control the funds, you need to report these accounts. However, you may also need to report accounts that you merely have a financial interest in.
For example, if your cousin is holding $10,000 in his overseas account, you may have an FBAR filing requirement, even though the account is not in your name.
Keep in mind that the reporting requirement doesn’t just apply to checking or savings accounts. Investment accounts, insurance policies with cash value, and certain other financial accounts may also need to be reported.
When in doubt, you should consult a tax professional to determine your filing requirements. You are better off erring on the side of caution and filing an FBAR than exposing yourself to the risk of FBAR penalties.
Reporting Business Accounts
Your business may also have an FBAR filing requirement as that definition of a “U.S. person” includes partnerships, LLCs, and corporations formed under the law of the United States. Even entities that are disregarded for federal tax purposes may have an FBAR filing requirement.
If your business files an FBAR, this doesn’t necessarily relieve you of your FBAR filing requirement. If you own more than 50% of a corporation or partnership, you may be required to report the company’s foreign accounts on your individual FBAR, in addition to the business being required to file its own FBAR.
The FBAR rules are complicated, particularly if you are involved in business entities with foreign activities. If you realize that you should have filed an FBAR during a prior year, you should contact a tax attorney immediately to learn more about your offshore disclosure options.
The Gartzman Law Firm handles offshore disclosure matters and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.