CPAs for Expats
The Complete FBAR Guide
Updated: Nov 26, 2018
What is the Purpose of the FBAR?
The purpose of the FBAR (Foreign Bank Account Report) is to collect information about financial accounts located outside the US owned/controlled by US citizens. This information enables the US government to identify individuals who may be avoiding US taxes by using foreign banks or using the accounts for unlawful purposes
Who is Required to File the FBAR?
Any United States person with financial interests in or signature authority over financial account(s) outside the borders of the United States, and the combined total of the account(s) exceeds $10,000 at any time during the calendar year, must file an FBAR.
Example: A United States person has three foreign financial accounts. The first account has a value of $5,000; the second has a value of $4,000, and the third has a value of $2,000. This person must report these accounts because the maximum combined value exceeds $10,000.
How to Determine and Report the Maximum Account Value?
To determine the maximum value of an account, approximate the highest value of nonmonetary assets or currency during the calendar year. It does not have to be exact, but it does have to be within reason. Periodic account statements can help to determine this. The maximum account value are reported on the FBAR using USD. The official US Treasury year-end exchange rates is used for the conversion.
Examples of Foreign Financial Accounts
Financial accounts required to be reported on the FBAR include:
Mutual funds and other publicly-available pooled funds
Securities accounts including commodity futures and options
The following are examples of foreign financial accounts that need to be reported on the FBAR:
A Canadian Registered Retirement Savings Plan (RRSP)
Canadian Tax-Free Savings Account (TFSA)
Mexican individual retirement accounts (Fondos para el Retiro)
Mexican Administradoras de Fondos para el Retiro (AFORE)
The following situations demonstrate financial interest in a foreign account for a United States person if:
He/she is the owner of record, even if the account is being maintained for another person and even if the other person is not a United States person.He/she directly or indirectly owns more than 50% voting power or shares of a corporation or any entity that is the owner of record or has signature authority of the foreign account. He/she has 50% or more beneficial interest in the trust (in assets or income) during a calendar year with a foreign account.
What is Signature Authority?
Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account.
Example: A United States person who has power of attorney with signature authority of her parents’ account in Europe. Even if he/she never exercised the power of attorney, he/she must report this account on the FBAR because of the signature authority.
Jointly Held Accounts
Each United States person who maintains an account or who owns partial interest in an account is required to report the entire value of the account if the combined total of all accounts is greater than $10,000
Failure to file an FBAR when required to do so may result in civil penalties, criminal penalties, or both
Due Date for Filing The FBAR
The FBAR is a calendar year report and must be received by the Department of Treasury on or before October 15 of the year following the calendar year being reported. If a filer does not have all the available information to file the return by October 15, the filer should file as complete a return as possible and amend the report when additional or new information becomes available.