How To Avoid Defaulting On Your FBAR Requirements
November 18, 2018 in Tax Tips & Tricks
The IRS requires you to report your foreign financial account(s) yearly to the Department of Treasury once it has exceeded certain thresholds. Included in the list of accounts to be reported are brokerage, mutual fund, and bank accounts. This can be filed electronically through the Financial Crimes Enforcement Network 114 (FinCEN 114), also known as a Report of Foreign Bank and Financial Accounts or Foreign Bank Account Reporting (FBAR). In order to avoid defaulting on this report’s requirements, you can follow the tips below.
First – Take Note of the Deadline
As of 2017, the report is due for filing every 15th of April. You will be given an automatic 6-month extension just in case you have not filed by that deadline. This extension means that you can file it before October 15.
Gather All of the Important Details for Filing
You must be ready to provide all the necessary information that is needed for FBAR filing. Answer the following questions accordingly:
- What types of foreign financial accounts do you have? Together with this, you must specify who co-owns the account with you, if there are any. Indicate whether these accounts are still active accounts. Of course, you also need to indicate the account numbers of the account. Make sure that you indicate when the accounts were opened.
- What currency are the accounts in? In line with this, you must also specify the highest balance the account has reached during the year. You must also indicate the account value as of December 31st for the year with which you are filing the report for. You also need to specify the interest that the account has gained for that specific year.
You Must File it Online
In the past, the report was filled out using a paper form. Now, it can be filed online. The online form can be used or you can upload the PDF form instead. The PDF form is a more convenient choice because you can save your work anytime and make changes whenever needed. It is also best to download the form and open it using Adobe Acrobat Reader.
Don’t Miss Out an Account!
Apart from bank accounts, there are a lot of other types of accounts that must be reported for FBAR. Certain types of pensions, life insurance policies, prepaid credit cards, and accounts which you have signatory authority over are included. You must also report all fixed deposit accounts, including the new account resulting from an annual fixed deposit account roll over.
Report The Correct Account Balance
This is often overlooked by those who are filing the report. You must take note that you are required to report the maximum or highest account balance for every account at the close of the calendar year in which you are filing the report for. Whether that balance stayed on your account for a day or a month, that balance has to be reported.
In line with this, you must make sure that the balance you report is in US dollars. If your account is in calculated in Euros, then you must report it in US dollars. The conversion must be based on the treasury exchange rate as of December 31st of the previous year. You can find the rates in the IRS website.
These are some of the basic things you have to remember when filing FBAR. If there is any confusion on your part, you can always consult Tax Defense Partners. Aside from filing this report, our team can provide assistance in the areas of delinquent taxes, penalty abatement, transcript analysis, and a whole lot more.