Although FBAR is not due for another six months but we want to remind you to keep FBAR in mind. Also consider filing the tax return in India if you had any income during 2013. Here are the basics of FBAR:
The Foreign Bank Account Report is also known as its acronym FBAR. It is an annual report used by Americans that is filed with the U.S. Treasury to report the existence of both foreign bank accounts and any other financial accounts that are held abroad. The Treasury Department Form 90-22.1, Report of Foreign Bank and Financial Accounts is required to be filled out by anyone that has had $10,000 or more that was held in a foreign account at any point in the prior calendar year.
The Foreign Bank Account Report is required to be filed by U.S citizens, U.S. residents, estates or trusts that were formed under United States laws and entities including partnerships, corporations, limited liability companies or any other entity that was organized or created under United States laws or in the United States.
FBAR will be required to be filled out if you have signature authority or financial interest in a foreign financial account which includes a bank account, mutual fund, trust, brokerage account or any other type of foreign financial account if they exceed the $10,000 threshold. The Secretary Act requires that you file the Report of Foreign Bank and Financial Accounts on a yearly basis.
Even if the account did not produce any taxable income during the year, a person may still have an obligation to report the financial account. To meet the reporting obligation, specific questions on your tax return regarding foreign accounts must be answered and the Foreign Bank Account Report must be filed.
The FBAR needs to be filed yearly with the Department of Treasury. The deadline is June 30th the year that follows the reported calendar year. Normally an extension of time for FBAR filings will not be granted. It is important to understand that the FBAR should not be filed with the federal tax return. Additionally, an extension of time for filing a tax return that is granted by the IRS is not extended to the FBAR’s filing deadline.
A person or entity that fails to file a correct and complete Foreign Bank Account Report when required to do so could be subject to a civil penalty up to $10,000 for each violation if they are not due to a reasonable cause. An example of a reasonable cause would be natural disasters.
In addition to the FBAR, a U.S. taxpayer who holds foreign financial assets could also have to file a form with the IRS. These assets need to be filed with the income tax return using Form 8938, Statement of Specified Foreign Financial Assets.
The IRS has reopened its Offshore Voluntary Disclosure Program which offers an opportunity for taxpayers to resolve any information and tax reporting obligations for unreported taxable income includes the FBAR. Even though there is no official end date, the Internal Revenue Service can end the Offshore Voluntary Disclosure Program at any time.
There are some exceptions to the Foreign Bank Account Report reporting requirements for certain financial accounts, U.S. citizens, U.S. residents, entities, trusts, and estates.
For further information about all of the reporting requirements and exceptions, carefully review the FBAR instructions.