Do You Need to File an FBAR?

Tax season beckons. Like too many Americans, you’re worried and confused. Do you need to file an FBAR in addition to your standard state and federal income taxes? Let’s clear this up, so you can relax and avoid trouble.

According to the IRS, the United States “persons” are obligated to file an FBAR if:

  1. You have a financial interest in or authority over at least one financial account outside the United States. The term “U.S. persons” applies to U.S. citizens, residents, entities, corporations, partnerships, trusts, and estates formed under the laws of the U.S.
  2. The combined worth of all overseas financial accounts surpassed $10,000 at any time during the year. This means the FBAR filing requirement applies to the combined balance of all foreign accounts. In other words, filers can spread the $10,000 out among several foreign bank accounts, but the law still requires you to file and report each account on your FBAR.

Exemptions From the FBAR Reporting Requirement:

Everything in life has exceptions, even FBAR reporting requirements. (Cue: comic rimshot.) The following list contains potential filing exceptions. These are taken verbatim from the IRS website—an excellent source of information on this topic:

  • “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
  • Owners and beneficiaries of U.S. IRAs
  • 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 (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust)
  • Foreign financial accounts maintained on a United States military banking facility.”

Find further information on reporting requirements and exceptions in the FBAR instructions. We highly recommend reviewing these instructions carefully. If any questions should arise, or if you need help handling an FBAR audit, please contact the Highland Tax Group team at 720-398-6088.