US Taxpayers (which includes US Citizens, Permanent Residents, Trusts, Estates, and Domestic Entities) with an interest in foreign financial accounts that meet the reporting threshold of an aggregate value exceeding $10,000 at any time during the calendar year, must file FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) – a/k/a - FBAR. Because $10,000 is an aggregate balance, if the US Taxpayer has more than one account with a combined account balance greater than $10,000 at any one time; all accounts would have to be reported.
Having an interest in a foreign financial account can be a:
Financial interest: the US Person is the owner of record or holder of legal title; the owner of record or holder of legal title is the US Person or their representative; the US Person has a sufficient interest in the entity that is the owner of record or holder of legal title.
Signature authority: the US Person has authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.
Where to File
Unlike Form 8938 (Statement of Specified Foreign Financial Assets), the FBAR is not filed with the IRS. The FBAR must be filed directly with the office of Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, via the BSA E-Filing System: http://bsaefiling.fincen.treas.gov.
In addition, filing Form 8938 does not replace or otherwise affect a taxpayer’s obligation to file an FBAR.
On December 16, 2016, via Notice 2016-1, FinCEN released a new annual due date for filing FBARs of April 15. The date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 which changed the FBAR due date to April 15 to coincide with the Federal Income tax filing season. The Act also permitted a maximum six-month extension of the filing deadline. FinCEN grants filers failing to meet the FBAR annual due date of April 15 are provided with an automatic extension to October 15 each year. Specific requests for this extension are not required. This means that if the US Person does not meet the April 15th due date, there is automatic extension until October 15th with NO REQUEST NEEDED.
On December 22, 2017, FinCEN issued Notice 2017-1 (Extended Filing Date Related to Notice 2016-1). FinCEN extended the filing due date to April 15, 2019, for certain Individuals whose filing due date for reporting signature authority was previously extended by Notice 2016-1. The due date remains April 15, 2018 for all other Individuals with an FBAR filing requirement obligation.
FinCen announced this further extension in light of a Notice of Proposed Rulemaking (NPRM) that FinCEN issued on March 10, 2016. This NPRM proposes to revise the regulations implementing the Bank Secrecy Act (BSA) regarding FBARs in the area of US persons with signature or other authority over foreign financial accounts, but no financial interest.
What does this mean?
There has been confusion amongst Company Officers that have signing authority in a Company’s bank account but have no financial interest. The Association of Financial Professionals (AFP) published an FBAR Report: What you Need to Know Report (https://www.afponline.org/docs/default-source/registered/2015fbar-2.pdf?sfvrsn=2&_n=7876) that includes responses from FinCEN directly regarding the concerns that company officers have regarding their responsibility to file FBARS. Some of the clarification points of the Report are:
“Officers of a corporation have the authority to expend funds with signature authority but no financial interest of the company’s account, then they are required to file a FBAR.
Internal approval is not a payment approval for FBAR purposes. Therefore, this does not constitute disposition of assets from a bank account. “Signature Authority does not mean Supervisory Approvals.”
Persons named on the general banking resolution only need to file a FBAR if their employer has also given them signature authority on bank accounts or specific access for the disposition of funds.
If the individuals named on the banking resolution cannot access banking systems or communicate instructions on the movement of funds legally or within company guidelines or policies then they do not need to file a FBAR”.
The extended filing deadline until April 15, 2019 applies to:
Individuals who have signature authority over, but no financial interest in, one or more foreign financial accounts.
Employees or officers of investment advisers registered with the US Securities and Exchange Commission (SEC) who have signature authority over, but no financial interest in, certain foreign financial accounts.
Don’t be a victim of your own making. If you are a US Person with a financial interest in foreign financial accounts with an aggregate value of $10,000 or more – or – an officer in an Entity with no financial interest, but with bank signing authority, consult your tax specialist now.