The Foreign Bank Account Report (FBAR) is the submission that any US citizens or persons who have/have had green cards must fill out to let the US Treasury Department know about any money being held in bank accounts outside of the US. It’s in an effort to enforce FBAR that Congress passed the Foreign Account Compliance Act (FATCA).
Chances are that you hadn’t heard of FBAR prior to all the news surrounding FATCA. Unfortunately, that’s no excuse as far as the US is concerned. But common wisdom dictates that it will probably be better for you if you turn yourself in than if they find you first; with FATCA being enacted in just a year and a half, they will find you.
So let’s say you’re like me and you want to make right with the Treasury Department, where do you start?
The form you want to fill out is TDF90-22.1. The current recommendation issues by H&R Block is to file your FBAR report as far back as 2003. Unless you make a habit of keeping meticulous records, this will probably be very difficult for you (as it is for me). The good news is that you can affix a letter with your filing in which you can explain any oddities, and these will, apparently, be taken into account.
You only need to file for years in which the total amount you had in all your accounts was greater than $10,000 at any point during the year. The way my H&R Block representative described it to me is this: When my parents sent me tuition money that only sat in my bank account for a day, at most, before it was transferred on to my university, that money was in my possession for a day too long and I must file that. Yikes!
Here is H&R Block’s list of accounts that need to be included in your report:
- Chequing accounts
- Savings accounts
- Deferred profit sharing plans
- Employee stock plans
- Cash value of life insurance
- Secured credit cards
- Any retirement plan that would have a cash value if the taxpayer were to leave employment
- Brokerage, stock, bond, derivatives, comodities, futures, or other security accounts
- Accounts where assets are held in a co-mingled account such as mutual funds, RP, defined contribution plans
- Any pooled fund that is available to the general public with a regular net asset value and regular redemptions
- Non-financial accounts, such as individual bonds, notes, stock certificates, precious metals, etc… held in the possession of the filer -NOT held in an account at a financial institution.
When defining a “foreign financial account,” it’s important to remember that the location of the account, not the location of the financial institution, is what matters. So if you have a Canadian account in a US bank, you must still report that.
The Treasury Department’s official statement regarding penalties (found on form TD F 90-22.1) is that anyone who fails to properly file will be subject to up to $10,000 in civil penalties (so not charged with a crime). These may be waived if they determine “reasonable cause” for failure to properly file. If they decide that someone has wilfully failed to report an account, they may be hit with a $100,000 fine (or 50% of the account’s balance) and possibly subject to criminal penalties.