If you have foreign bank accounts in other countries as a US citizen, you may be wondering what this means when it comes to filing your taxes. Per the Bank Secrecy Act (BSA), foreign financial accounts must be reported to the department of treasury every year.
This act gives the treasury department authority to collect information from US persons who have financial interests outside of the States with the purpose of identifying people who might be using these foreign accounts to circumvent US law. The FBAR helps to identify and trace these types of situations.
What is FBAR?
FBAR is a report of foreign bank and financial accounts such as bank accounts, brokerage accounts, retirement or mutual funds.This report must be filed by any US citizen, corporation, partnership, limited liability company, trust or estate with a foreign financial account, or combination of accounts, which exceeds $10,000 at any time during the calendar year.
However, if the aggregate value on the last day of the year is more than $100,000 as married filing joint taxpayers, you would need to file form 8938 to the IRS as well. This form is also required for married filing separate taxpayers with more than $50,000 in foreign assets, $75,000 as an unmarried taxpayer or if you are a taxpayer living abroad. Form 8938, which is a Statement of Specified Foreign Financial Assets, is attached to the income tax return for taxpayers with higher foreign asset thresholds.
This annual report must be filed before April 15th following the reported calendar year. Each account must report the following:
Name on the account
Name and address of the foreign bank
Type of account
Maximum value during the year
What needs to be reported?
Securities derivatives accounts
Other financial instrument accounts
Commodity futures or options accounts
Insurance of annuity policies with cash values
Such as whole life insurance policy
Mutual funds or similar pooled funds
Any other account maintained in a foreign financial institution or with a person performing the services of a financial institution
If you have questions relating to your foreign financial account, contact Henson & Murtha CPAs or leave a comment below.