Reminder: Evaluate the need for FBAR filings before filing your personal income tax return

By Heather Smithson, Tax Manager

2015 FBAR Filing Due June 30, 2016 – 2016 FBAR Filing Date Extended.

BIG penalties for non-compliance!

The IRS can impose a $10,000 penalty for each non-willful violation of the FBAR filing requirement and a $10,000 penalty for the failure to report foreign financial assets on Form 8938.  Higher civil penalties can apply for willful failure to file and negligence.

A U.S. person (a citizen or resident of the United States including partnerships, corporations, estates and trusts) with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during the year generally must file a FinCEN Form 114, Foreign Bank Account Report (“FBAR”).  The FBAR filing requirement is not part of filing U.S. income tax return and is filed separately and directly with FinCEN.  FBARs must be filed electronically, by the U.S. person, or by an appointed, third-party advisor.

Do not wait until June 2016 to consider FBAR filing requirements as these filings may impact your personal U.S. individual income tax compliance obligations, as outlined below.

U.S. Internal Revenue Service Form 1040 – Individual Income Tax Return

• Schedule B, Part III, Question 7a of your individual income tax return – Form 1040 asks (1) if you have had any financial interest in or signature authority over a foreign financial account located in a foreign country and (2) if you are required to file, FinCEN Form 114, a separate U.S. Treasury Department Foreign Bank Account Report (“FBAR”).  FBAR filers need to mark “Yes” to both questions.

• Schedule B, Part III, Question 7b of your individual Form 1040 asks for the names of the foreign countries where the financial account is located.  FBAR filers need to list the country name(s) where the accounts are located.

• Filing Form 8938 – Statement of Specified Foreign Financial Assets with your Form 1040 is required if you have an interest in certain foreign financial assets and meet the reporting threshold set by the IRS.

On July 31, 2015, President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 – HR 3236.  This law updated various filing dates, including the date for FinCEN Form 114 (The “FBAR”) and is effective for taxable years beginning after December 31, 2015.

FinCEN Notice 2015-1, extended the June 30, 2016 deadline for filing 2015 FBARs has been extended to April 15, 2017 for reporting signature authority held during calendar years 2010 through 2014 for employees and officers of certain regulated entities, publicly traded companies and their subsidiaries.

For taxable years beginning after December 31, 2015, the FBAR will be due on April 15.  Previously, the due date for the FBAR was June 30.  The new law also allows for the FBAR to be extended through October 15^th, the old law did not allow for the FBAR to be extended.

As this change in the FBAR due date is for taxable years beginning after December 31, 2015, the 2015 FBAR is still due on June 30, 2016 and no extensions are available.

Questions? We can help. Please contact us if you need assistance with filings.  804.747.0000 | Email

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Heather has over 13 years of tax experience with a focus on providing international tax services to businesses and individuals. Read more of Heather’s insights on our blog.