Avoiding FBAR By Keeping Balances Low

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One of our readers made a comment about avoiding FBAR by keeping the balance low in your foreign bank account.  I am sure many of our readers have at least thought about this scenario at one point or another and therefore I would like to discuss this question in a blog format to point out a couple of important factors. Let’s start with our reader's comment:


Thanks. I got a very good understanding of FBAR with your videos. a silly question that arises in my mind is, what if I always transfer $9000 to Indian bank and immediately transfer to Parent’s bank account thus making room for another $9000. Hence avoiding “$10000 worth INR at any point in time in foreign bank


Here are a few things you want to keep in mind.


Number One:


-According to the Department of Treasury, you must file FBAR if you have written or verbal control over a financial asset in a foreign country. So, if you are transferring the funds to your parent's account but keeping control of that account then you should file FBAR.  Although it might be a bit hard for Govt. to prove that you had control over your parent's account if you are not listed as an account holder but the law is always open to interpretation by smart attorneys of this fine nation.

 

Number Two:


An individual is only entitled to gift up to $14000 per year without having to take their lifetime estate exemption and filing the proper paperwork.   If you simply transfer $9000 to your parent's couple times than you will be required to report this as a GIFT to your parents and you must file the proper paperwork to deal with estate taxes.


Please note that the year gift exemption threshold increased every year. Here are some historic figures.

 

YearAnnual Exclusion Amount
1997$10,000
1998$10,000
1999$10,000
2000$10,000
2001$10,000
2002$11,000
2003$11,000
2004$11,000
2005$11,000
2006$12,000
2007$12,000
2008$12,000
2009$13,000
2010$13,000
2011$13,000
2012$13,000
2013$14,000


Number Three:

 

Lastly, you should also consider how you will bring the money back to the US if needed.  I won’t get into this topic today but if you don’t send the money via proper disclosure than you are simply postponing the problem.  You will run into various issues at some point.

The question I have for you is that why don’t we simply file the FBAR?  As discussed much time by Sanjiv, FBAR is not a tax. It is simply a disclosure requirement.

Our office can file your FBAR for last year or help with filing proper documents for delinquent FBAR’s.


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