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The Foreign Bank and Financial Accounts Regulations (FBAR) form came into existence as part of the Bank Secrecy Act of 1970 (BSA) with the aim to prevent taxpayers from avoiding paying taxes by hiding assets overseas. However, the IRS has enforced foreign financial account reporting rules for American taxpayers. Widespread non-compliance over the years arose confusion and misunderstanding of the filing requirements’ nuances as from willful negligence. This form is used to report all the foreign financial accounts of a resident person which includes brokerage accounts, bank accounts, mutual funds, and more.

Who Needs to File FBAR?

A resident of the United States including a corporation, partnership, limited liability company, trust, and estate, must file an FBAR to report a financial interest if the aggregate value of those foreign financial accounts located outside the U.S.A exceeds $10,000 at any time during the previous calendar year reported.

Who Don’t Needs to File FBAR:

Any resident individuals for the calendar year if:

All your foreign financial accounts are reported on a consolidated FBAR.

All your foreign financial accounts are jointly owned with your spouse and:

You have completed and signed FinCEN Form 114a authorizing your spouse to file FBAR reports on your behalf.

When To File FBAR:

The FBAR deadline is April 15th as well. If you cannot file the form before the FBAR filing deadline, there is an automatic FBAR extension to October 15. If you need to file the form later than October 15, you will have specific requirements to extend the deadline further.

Which All Accounts Are Covered Under FBAR:

1. Securities accounts, including brokerage accounts, securities derivatives, and other financial instruments.

2. Bank accounts, including savings accounts, time deposits, etc.

3. Cryptocurrency, including Bitcoin, and other forms of digital currencies

4. Mutual funds or other similar pooled funds

5. Insurance policies include whole life insurance, business insurance, etc.

6. Any other accounts maintained in a foreign financial institution or with a person or company rendering financial institution’s services

Penalties Under FBAR:

The penalties under FBAR can be civil as well as criminal liabilities depending upon the nature of the crime

Negligent violation Up to $1,166
Non-willful violation Up to $13.481 for each negligent violation
Pattern of negligent activity – Up to $90,743
Willful failure to file or maintain required records. The greater of 50 percent of the amount in the account at the time of the violation or $134,806.
Willful failure to file or maintain required records while also violating specific other laws. The greater of 50 percent of the amount in the account at the time of the violation or $100000.
Knowingly and willingly falsifying an FBAR. The greater of 50 percent of the amount in the account at the time of the violation or $100, 000

Criminal Liabilities under Foreign Bank and Financial Accounts regulations (FBAR):

The maximum criminal penalties that may apply are as follows:

1. Willful failure to file or maintain required records – Imprisonment Up to five years in prison with a fine of up to $250,000, or both.

2. Willful failure to file or maintain required records while also violating specific other laws Imprisonment up to 10 years with a fine of up to $500,000, or both.

3. Knowingly and willingly falsifying an FBAR – Imprisonment up to five years in prison with a fine of up to $10,000, or both.

The author Sushant Gangurde is a legal analyst @Taxblock India who aims to educate people about various tax laws and financial planning.

Author Bio

Taxblock, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Individual & Corporate View Full Profile

My Published Posts

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