FBAR Filing How To and Common Questions Answered
Sep 10, 2017
This post provides a quick overview of how to discover if you might need to file the FBAR form, and then explores some of the most common questions associated with disclosing foreign assets and foreign accounts to the IRS. It is crucially important to know your rights and stand up for yourself against the IRS. By staying current on the FBAR Wiz blog, you will stay current on the hottest tips, news, and updates regarding FBAR and the IRS offshore disclosure process, potentially saving yourself tens of thousands in unnecessary penalties. Be sure to check out the free and anonymous FBAR Wiz app to determine what filing obligations that you have to the IRS regarding foreign assets and foreign accounts. To discover if you meet the FBAR filing threshold, follow this process:
- Find the highest balance during the year. For example, if you have a checking account, you should skim your monthly statements to find the highest balance. (Some people download their statements to Excel and use a function to find the highest balance, others write down the highest balance every month or quarter, so they only have 4 or 12 numbers to compare at year end. I just skim with my eyes.)
- If you moved money between accounts, you need to include the highest balance in each account, even if this means essentially reporting the same dollar twice.
- Convert the balances to U.S. Dollars (USD) using the YEAR END exchange rate (regardless of when the highest balance occurred).
- Add up all the balances in USD. Include 100% of accounts you own jointly. If you and your spouse (if relevant) have any separate accounts (such as a pension), you should calculate the total separately for each of you.
- If the total is at least $10,000 you must file an FBAR. If spouses have individual accounts, both must file an individual FBAR reporting both their individual accounts and joint accounts.
Common Questions on the FBAR Filing and Submission Process
1. What if I am only an approved signor on the foreign financial account? You still have to include such foreign financial account on your FBAR, but the manner in which you report it will vary depending on other details of each account. If you are listed on the account with signature authority but you do not personally benefit from any of the funds in the account, you must report this foreign bank account in Part IV. Otherwise (for example if you are receiving a portion of income from the account), you must report the foreign financial account on Part III of the FBAR form. 2. What currency must I use on FBAR? United States Dollars is the only acceptable FBAR currency. In general, the IRS makes an effort to keep everything 'US-centric.' 3. What value must I use to report my accounts or determine my requirement to file FBAR? 'You must report each account’s highest balance during the calendar year in question. 4. Do non-financial assets such as rental or property real estate value need to be listed on the FBAR form? No, only foreign financial accounts need to be reported on the FBAR form. You may be required to file Form 8938 if your foreign assets exceed certain levels, but you are not required to include them on the FBAR Form, i.e., Form TD F 90-22.1. 5. How may the FBAR form be submitted? As of July 1, 2013, the only option for submitting your FBAR is online. You are now required to submit the FBAR Form, aka Form Fincen 114, electronically through the Financial Center of the US Treasury Department’s website: https://bsaefiling.fincen.treas.gov/main.html. 6. If I am the owner of a foreign company that has a foreign financial account in its name, how do I report this account on my FBAR? The answer to this question is that: it depends. In this case, the additional details to consider are that of your involvement with the foreign company. If you have at least 50% ownership of the company, you will report the account in Part II as an individual account on the FBAR form. Select account type as "other" and provide description: "[company name] - Corporate account." If you own 49% or less of the foreign company but you are still listed as a holder or signor of the foreign financial account, you will use section IV to report this information. 7. I own more than 50% of a foreign corporation. Should I report the foreign financial account in my name or my company’s name? You want to put your name as the primary and then in parenthesis add the company's name. 8. When asking how many joint account holders, am I supposed to include myself in the answer? No. The filer is considered the account holder and the term "joint account holders" refers to everybody else. If you split the account equally, you will have an opportunity to include that person’s name and information in Part III of the FBAR form. 9. Am I required to include my insurance policy in my FBAR? Maybe. The answer is, “yes,” in the event your insurance policy has a cash surrender option attached to it. If your insurance policy does have a value that can be redeemed for cash on or before December 31 of the taxable year at issue, then you will be required to include it on your FBAR in Part II. On this part of the form, you will be asked for the type of account you’re reporting on Line 16 - here you should mark it as “other” and write “insurance” as the description of the account. A great first step is to use the free and anonymous FBAR Wiz app to determine what forms that you need to file if you have foreign assets and/or foreign accounts.