Don't Mess With Taxes

The big deadline change for 2021 was when the Internal Revenue Service extended the regular income tax filing deadline from April 15 to May 17.

But it also made a few more calendar moves, including one that this month affects folks with foreign financial accounts.

The IRS left in place the due date for filing Form 114, Report of Foreign Bank and Financial Accounts, usually referred to as FBAR. Sort of.

Although the tax agency didn't move the April deadline, it did grant FBAR filers an automatic extension until Oct. 15.

That's right. Owners of foreign accounts now face the same due date as regular income tax taxpayers who got extensions to file. But FBAR filers didn't have to send in any extra paperwork for the added time.

However, all taxpayers on filing extension, whether for Form 1040 or Form 114, must meet the Oct. 15 due date or face the consequences.

FBAR missed filing costs: For overdue FBAR filing, the penalties are steep.

If you are required to file an FBAR and don't do so, you could face a civil penalty of up to $10,000. The penalty could be waived if you can show reasonable cause for missing the filing.

Also, filers affected by a natural disaster may have their FBAR due date further extended.

But if you willfully fail to report an account or don't provide required account identifying information, the penalty price goes up.

You could be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation.

And it's not just money Uncle Sam might come after. You also could be subject to criminal penalties that could end up with a prison sentence.

Now that those dollar amounts, and possibility of jail time, got your attention, here's the deal on filing FBAR,

Who must file FBAR? The Bank Secrecy Act requires U.S. citizens, as well as resident aliens, corporations, partnerships, limited liability companies, trusts, and estates, to file an FBAR if they have:

1. Financial interest in, signature authority or other authority over one or more accounts, such as a bank account, brokerage account, mutual fund or other financial account located outside the United States, and
2. The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

Note the wording in the second requirement. All foreign financial accounts. Aggregate value. At any time during the year. And, of course, the dollar amount of $10,000.

Because of that $10,000 threshold, the IRS encourages anyone or any entity with a (or more than one) foreign account, even relatively small ones, to doublecheck to see if their total non-U.S. holdings trigger a FBAR filing requirement.

Pay attention, too, to what is considered as a reportable financial account. It includes:

• Bank accounts, such as savings accounts, checking accounts, and time deposits,
• Securities accounts, such as brokerage accounts and securities derivatives or other financial instruments accounts,
• Commodity futures or options accounts,
• Insurance policies with a cash value, such as a whole life insurance policy,
• Mutual funds or similar pooled funds, such as a fund that is available to the general public with a regular net asset value determination and regular redemptions, and
• Any other accounts maintained in a foreign financial institution or with a person performing the services of a financial institution.

How to file: OK, you have a foreign account that meets the filing requirements. Now what?

Although the filing due dates for normal income tax returns and FBAR coincide, you don't file Form 114 with your return. In fact, it's not even technically an IRS form.

Its FinCEN Form 114, with FinCEN standing from the Financial Crimes Enforcement Network.

And the FBAR filing must be done electronically through the Banking Secrecy Act (BSA) E-Filing System website. There's no need to register to file the FBAR as an individual. And you get two options at the site, either in PDF format or a more traditional direct online submission.

If you're unable to e-file your FBAR, call FinCEN toll-free at (800) 949-2732 if you're in the United States. If you're outside the country, the call to (703) 905-3975 will cost you.

More FBAR filing info: You can read more about FBAR filing and see additional examples in my earlier post FBAR filing deadline is April 15. Or Oct. 15.

You also can check out FinCEN's Reporting Maximum Account Value and these FBAR and U.S. taxpayers abroad resources at the IRS website:

• International Taxpayers 
• IRS FBAR Reference Guide
• How to report foreign bank and financial accounts
• FAQs About International Individual Tax Matters
• Tips for Effectively Receiving a Tax Refund for Taxpayers Living Abroad

And, of course, you can discuss your foreign financial accounts and the tax and FinCEN requirements with your tax adviser.

You also might find these items on other global tax matters of interest:

• Pay your taxes to protect your passport
• 2021 housing cost tax break amounts for U.S. expatriates
• FinCEN, FBAR and other tax costs that prompt or slow U.S. expatriations

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