The new April 18, 2017, deadline for filing Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts, has come and gone. Certain individuals and businesses are required to annually file this form with FinCEN, which is a bureau of the Department of the Treasury. If you missed the due date, we will explain what you need to do later in this article. But first, we will discuss who is required to file, when and how to file, and what you need to know about recent IRS-issued guidance, “Report of Foreign Bank and Financial Accounts (FBAR).”
Who Must File the FBAR?
In general, taxpayers must file the FBAR upon meeting both of the following conditions:
For those meeting both conditions, there is a requirement to file an FBAR even if the account generates no taxable income. A single foreign account can potentially create multiple filing requirements. For example, a corporation with a foreign bank account must file an FBAR under the corporation’s name, and the individual officer who has signature authority over the account must also file an FBAR for the account under his or her name.
Additionally, the filing requirements are to be tested each year. In other words, taxpayers may have met both conditions above in one year (and must file), yet in the next year may not have a filing obligation if one or both conditions are not met.
Several exceptions to the reporting requirements include:
The above list is not all-inclusive and a taxpayer should consult a tax advisor to discuss his or her unique situation.
When Is the FBAR Filed?
The FBAR is a calendar year form regardless of the fiscal year of the taxpayer. As such, the filing must be remitted electronically by April 15 each year, adjusted for weekends and holidays. The 2016 FBAR was due April 18, 2017. This is a new due date as, in previous years, the return was due June 30. However, unlike previous years, there is an automatic six-month extension available. This is great news for any filers that missed the new April 18 deadline! The other good news is that the extension is automatic–no extension form needs to be filed with the FBAR. For those that did not file as of April 18, 2017, the extended due date is October 16, 2017.
How Is the FBAR Filed?
The FBAR is not filed with your tax return; it is filed directly with FinCEN using Form 114. For 2012 and all subsequent years, the FBAR must be filed electronically–no paper copies are accepted. The taxpayer may file his or her own return or use the services of a certified public accountant to file the return on the taxpayer’s behalf.
FinCEN has expressed its intention not to cause undue burden to taxpayers and, as such, is allowing the automatic extension. It also allows a taxpayer to file the return late for reasonable cause and to document the reason for the late filing to avoid penalties. Even with this leniency, if a taxpayer files late or not at all with no reasonable cause, the penalties are quite onerous. The Internal Revenue Service has the authority to assess a civil penalty of $12,459 per violation for non-willful violations of the filing requirement. Willful violations are subject to a penalty which is the greater of $124,588 or 50% of the balance in the foreign financial account generating the violation. The liability for the penalty may be that of the business or the individual with the financial interest or signature authority over the foreign account. Therefore, individual officers of corporations may be surprised to find themselves facing very strict penalties for not filing an FBAR in their own names.
If You Missed the Filing Date, Do Not Fear
If you missed the original filing date, the extended filing date, or perhaps were unaware of your filing requirement altogether, there is no reason to panic. In certain circumstances, a taxpayer who seeks to be in compliance with FinCEN and the FBAR reporting requirement will be allowed to “catch up” on filings to become compliant again.
As a certified public accounting firm, PYA not only guides individuals and organizations through filing requirements but also provides continued assistance with adherence to FBAR deadlines, missed filings, and requests for penalty waivers.
If you have any questions about FBAR filing requirements, or would like to request a speaker on this topic for your organization or event, contact one of our executives below at (800) 270-9629.