What is FBAR Filing? – Master of Accounting Degrees

The Foreign Bank Account Report (FBAR) is a type of Internal Revenue Service filing required of people with foreign accounts, but you may wonder if you must go forward with FBAR filing.

This type of filing is mandatory for those who meet certain requirements. It includes anyone who has financial accounts registered in another country. If you live in the United States full-time or part-time and do business overseas, you may need to file this form at the same time that you file your taxes or later in the year. The IRS accepts the filing of this form up through the beginning of June.

Who Must File?

There are two requirements regarding who must file an FBAR form. You must be a citizen of the United States and have one or more financial accounts overseas that total more than $10,000 in assets. If you have a savings account in France with a few hundred dollars in it, you generally do not need to file this form. Many people have foreign bank accounts because they have a vacation home in that country, they do business in that nation or they live abroad. When your financial accounts total more than $10,000 in assets, you must file.

Penalties for Not Filing

The IRS requires that American citizens who make above a certain amount every year file their taxes. Depending on the amount you paid throughout the year, you may receive a refund or a bill for taxes owed. If you do not pay your taxes or set up a payment plan, the IRS can levy your assets, including any homes you own or bank accounts you have. The IRS can also charge a financial penalty against anyone who fails to file the FBAR. This fine can equate to half of the money in your account or up to $100,000.

Foreign Account Tax Compliance Act

Similar to the FBAR, the IRS now follows the Foreign Account Tax Compliance Act. This act applies to anyone who is an American citizen and either has financial assets or does business overseas. It also applies to American citizens living overseas. If you make more than $50,000 outside of the country, you must file a separate form when you file your taxes. The IRS increases this limit to $100,000 for married couples living outside of the United States.

IRS Exceptions

Even if you know what FBAR filing is, you need to keep in mind that there are some exceptions. According to the Internal Revenue Service, citizens may not need to file or report income/assets relating to foreign accounts co-owned between two spouses, those who have financial accounts on an American military base and anyone has an account with a financial institution owned by the United States. Though you may think that you do not need to file because the IRS cannot charge taxes on your account, you should still file. If you have any questions about filing this form or whether you need to file, you can contact the IRS directly.

The IRS determines the amount of taxes that you owe each year based on how much you made, the assets that you have, what you paid in the previous calendar year and any deductions you took. You may need to go forward with FBAR filing because of financial accounts or assets that you own outside of the country.