International Tax Alert - June 2016

June 2016

2015 Foreign Financial Account Report (FinCEN Form 114) Should Be Submitted Electronically No Later than June 30, 2016

Download PDF Version


Affecting

Any United States persons with a financial interest in or signature authority over foreign bank and financial accounts with a total balance exceeding $10,000 at any time during the calendar year.


Background

United States persons, as defined under applicable banking regulations (and not under federal tax law), are required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”), if they have a financial interest in or signature authority over foreign bank accounts with an aggregate value exceeding $10,000 at any time during the calendar year. The definitions and rules are found in regulations issued by the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) and require that the FBAR filings are received by Treasury no later than June 30th.
 

Details

United States persons are required to file the FBAR for certain foreign financial accounts in which they have direct or indirect ownership in or signature authority over, if such accounts have an aggregate value exceeding $10,000 at any time during the calendar year. The filing requirements for signature authority and direct and indirect ownership of reportable financial accounts are complex and should be reviewed to determine the financial accounts for which a United States person has an FBAR filing requirement.  Specific filing instructions, definitions regarding United States person and financial accounts, and other related FBAR guidance can be found on the FinCEN’s website.
 
Additionally, the Internal Revenue Service (“IRS”)  has included several items on its website that provide information regarding the filing requirements and the types of financial accounts that are required to be reported on FBAR filings. These items can be accessed at the IRS web site at the following links:
 
Report of Foreign Bank and Financial Accounts (FBAR)
 
Comparison of Form 8938 and FBAR Requirements
 
Internal Revenue Manual
 
E-Filing Requirement
The FBAR filing must be received by the Treasury Department by June 30, 2016 (for FBARs related to calendar year 2015). This filing must be done electronically. 
 
In addition to Form 114, the taxpayer must complete Form 114a, Record of Authorization to Electronically File FBARs, in order to permit a third-party to sign and submit the FBARs on their behalf electronically. This may be used in the instance of an officer or employee with signature authority, but no financial interest in an account held by its employer, to authorize said employer to file the FBAR on his behalf.
 
Filing Date Change for Form FinCEN 114 Filings Due in 2017 
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 changed the FBAR filing due date from June 30th to April 15th and provides for an extension to October 15th, effective for the 2016 calendar year (for FBAR filings required to be filed in 2017). The proposed regulations also provide for a waiver for any late filing penalty for first-time filers who fail to timely request or file an extension (but file by October 15th.
 
Penalties
The FinCEN regulations include an anti-avoidance rule that will require FBAR reporting if an entity is created for the purpose of evading FBAR reporting. Failure to file an FBAR report may subject the non-filer to civil and criminal penalties. Penalties for a willful failure to file can be as much as the greater of $100,000 or 50 percent of the amount in the account at the time of the violation.
 

How Can BDO Help

Due to increased scrutiny and severe penalty regime with respect failure to file FBARs, it is important for all individuals and entities to review whether there is any financial interest in or signature authority over accounts subject to FBAR reporting. BDO can help you review these requirements and submit any FBARs electronically. 

For more information, please contact one of the following practice leaders:
 

Robert Pedersen
International Tax Practice Leader

 

William F. Roth III
Partner


 

Scott Hendon
Partner

 

Jerry Seade
Principal


 
Monika Loving 
Partner
 

Joe Calianno
Partner and International Technical
Tax Practice Leader


 
Brad Rode
Partner
 

Chip Morgan
Partner