The Tax Times: FBARs Must be Filed by June 30 through the BSA E-Filing System

For 2014, FBARs must be electronically filed by June 30 through the BSA E-Filing System using the electronic FinCEN Form 114, which supersedes the now-obsolete paper Treasury Department Form 90-22.1.

The IRS now has a new – FBAR Reference Guide on IRS.gov., this Guide is provided to educate and assist U.S. persons who have the obligation to file the FBAR; and for the tax professionals who prepare and electronically file FBAR reports on behalf of their clients. This Guide also supports IRS examiners in their efforts to consistently and fairly administer the FBAR examination and penalty programs.

Who Must File the FBAR?

A United States person must file an FBAR if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year.

Who is a United States Person?

A "United States person" means:

A citizen or resident of the United States;
An entity created or organized in the United States or under the laws of the United States. The term "entity" includes but is not limited to, a corporation, partnership, and limited liability company;
A trust formed under the laws of the United States; or
An estate formed under the laws of the United States.

Disregarded Entities: Entities that are United States persons and are disregarded for tax purposes may be required to file an FBAR. The federal tax treatment of an entity does not affect the entity’s requirement to file an FBAR. FBARs are required under a Bank Secrecy Act provision of Title 31 and not under any provisions of the Internal Revenue Code.

United States Resident: A United States resident is an alien residing in the United States. To determine if the filer is a resident of the United States, apply the residency tests in 26 U.S.C. § 7701(b). When applying the § 7701(b) residency tests use the following definition of United States: United States includes the States, the District of Columbia, all United States territories and possessions (e.g., American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the United States Virgin Islands), and the Indian lands as defined in the Indian Gaming Regulatory Act.

Example: Matt is a citizen of Argentina. He has been physically present in the United States every day of the last three years. Because Matt is considered a resident by application of the rules under 26 U.S.C. § 7701(b), he is required to file an FBAR.

Example: Kyle is a permanent legal resident of the United States. Kyle is a citizen of the United Kingdom. Under a tax treaty, Kyle is a tax resident of the United Kingdom and elects to be taxed as a resident of the United Kingdom. Kyle is required to file an FBAR. Tax treaties with the United States do not affect FBAR filing obligations.

Financial Account

Financial account includes the following types of accounts:

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 (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions),
Any other accounts maintained in a foreign financial institution or with a person performing the services of a financial institution.

Example: A Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican Administradoras de Fondos para el Retiro (AFORE) are foreign financial accounts reportable on the FBAR.

Example: Foreign hedge funds and private equity funds are not reportable on the FBAR. The FBAR regulations issued by FinCEN on February 24, 2011 do no require the reporting of these funds at this time.

A financial account is foreign when it is located outside of the United States, which includes the following places:

o United States, including the District of Columbia;

o United States territories and possessions, such as:

Commonwealth Northern Mariana Islands
District of Columbia
American Samoa
Guam
Commonwealth of Puerto Rico
United States Virgin Islands
Trust Territories of the Pacific Islands
Indian lands as defined in the Indian Gaming Regulatory Act.

Typically, a financial account that is maintained with a financial institution located outside of the United States is a foreign financial account.

Example: An account maintained with a branch of a United States bank that is physically located in Germany is a foreign financial account.

Example: An account maintained with a branch of a French bank that is physically located in Texas is not a foreign financial account.

Example: Ed, a United States citizen, purchased securities of a French company through a securities broker located in New York. Ed is not required to report these securities because he purchased the securities through a financial institution located in the United States.

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