Americans with a financial interest in or signature authority over a foreign financial account are required to file an FBAR if the aggregate value of all foreign accounts is more than $10,000.
In a globalized world, it is common for individuals to hold assets outside the U.S. However, U.S. taxpayers are often unaware that there are special reporting requirements for their non-U.S. based assets leading to substantial penalties. This article will provide a general overview of the current reporting requirements for foreign financial assets on the Report of Foreign and Financial Accounts ('FBAR') and on Form 8938 under the Foreign Account Compliance Act ('FATCA'). We will also review the interpretation and scope of penalties arising from non-disclosure, which have recently been the subject of two appeals to the United States Supreme Court.
- FBARs
A United States Person ('U.S. Person') with a financial interest in or signature authority over a foreign financial account is required to file an FBAR for the corresponding year if the aggregate value of all foreign financial accounts is more than $10,000 (adjusted for inflation annually) at any time during the calendar year.
- US Person
A U.S. Person means a citizen or tax resident of the United States, a domestic corporation, domestic partnership, any estate other than foreign estates, U.S. trusts, and any other person not considered a foreign person.
- Financial Interest
A U.S. person will have a financial interest when:
- The person is the owner of record or holder of legal title regardless of whether the account is held for the benefit of a U.S person or non-U.S. person.
- The person is the owner or holder of legal title but is acting as an agent or attorney or is acting on behalf of the U.S. person concerning that account or has any signatory authority over the account.
- Financial Account
Generally, any account located at a financial institution outside the United States is considered a foreign financial account. Financial accounts include bank accounts such as savings and checking accounts and time deposits, and securities accounts, among others. In addition, any foreign securities, interest, or contract held for investment issued by someone not a U.S. person must be reported, including any stock or securities issued by a foreign corporation and partnership interests, among others.
- Records
Taxpayers must keep records of the accounts reported for five years, counting from the FBAR's due date. Documents...
