FBAR

Starting March 28, 2011, US tax residents, holding a financial interest in, or signature authority over, a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account in 2010 and all subsequent calendar years,  may be required, with certain exceptions, to  report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The FBAR is not filed with the filer's federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, on or before June 30th of the year following the calendar year being reported. Please note that starting from June 30, 2013, all FBAR forms must be filed electronically.

 Who Must File an FBAR

United States persons are required to file an FBAR if:

  1. The United States person had a financial interest in, or signature authority over, at least one financial account located outside the United States; and
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calender year to be reported.  (For example, if the balance in the account was $10,000 or over in any one given day during the calender year.) 

A 'United States Person' is defined as United States citizens, United States residents, entities including, but not limited to: corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States, and trusts or estates formed under the laws of the United States. 

Tax attorneys of the Law Offices of Daria S Brovchenko regularly provide assistance with FBAR filing and compliance and would be happy to assist you with the same. Please contact the Law Offices of Daria S Brovchenko to speak with a tax attorney.

 

FATCA

The Foreign Account Tax Compliance Act (FATCA) states that U.S. taxpayers with specified foreign financial assets with an aggregate value exceeding $50,000 must report those assets to the IRS with their federal income tax return on new Form 8938. In addition, FATCA requires foreign financial institutions to report directly to the IRS information about financial accounts held by U.S. taxpayers, or held by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010.  For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season.

Please note that higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad. 

  You must file Form 8938 if:

  1. You are a specified individual; AND
  2. You have an interest in specified foreign financial assets required to be reported; AND  
  3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applied to you. 

A 'specified individual' is:  

  • A U.S. citizen
  • A resident alien of the United States for any part of the tax year (a green card holder or present in the United States for more than 6 months) 
  • A nonresident alien who makes an election to be treated as resident alien for the purposes of filing a joint income tax return
  • A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico  

A 'specified foreign financial asset' is: 

  • Any financial account maintained by a foreign financial institution (with certain exceptions)
  • Other foreign financial assets held for investment that are not in an account maintained by a U.S. or foreign financial institution, namely:  
  1. Stock or securities issued by someone other than a U.S. person, 
  2. Any interest in a foreign entity, and
  3. Any financial instrument or contract that has as an issuer or counterparty a non-U.S. person.  

Please contact our office for a full list of specified foreign financial assets.  

The following are list of some of the common reporting thresholds: 

  • Unmarried taxpayers living in the U.S.: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
  •  Married taxpayers filing a joint income tax return and living in the U.S. : The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.
  • Married taxpayers filing separate income tax returns and living in the U.S.: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.  

 Taxpayer living abroad 

You are a taxpayer living abroad if: 

  • You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
  • You are a U.S. citizen or resident, who during a period of 12 consecutive months ending gin the tax year is physically present in a foreign country or countries at last 330 days.  

If you are a taxpayer living abroad you must file if:

  • You are filing a return other than a joint return and the      total value of your specified foreign assets is more than $200,000 on the      last day of the tax year or more than $300,000 at any time during the      year; or
  • You are filing a joint return and the value of      your specified foreign asset is more than $400,000 on the last day of the      tax year or more than $600,000 at any time during the year.

Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification). Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.

Tax attorneys of the Law Offices of Daria S Brovchenko are highly experienced with the FATCA matters and are able to provide qualified legal advice in respect of the filing and non-filing requirements of FATCA. Please contact our office to speak with a tax attorney.

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The Law Offices of Daria S. Brovchenko are located in San Diego, CA. We represent clients throughout Southern California including, San Diego, Los Angeles, Poway, Vista, Chula Vista, El Cajon, Coronado, La Jolla, Pacific Beach, Oceanside, Carlsbad, Encinitas, Escondido, Rancho Bernardo, Del Mar, Solana Beach, Scripps Ranch, La Mesa, Lakeside, Eastlake, Bonita, Anaheim, Santa Ana, Newport Beach, San Diego County, Orange County and Riverside County. We also represent clients globally, including Russia, China, Italy, Japan, Brazil and Mexico.