Tax Insights

Your Guide to State, Local, Federal, Estate + International Taxation

Properly maintaining your foreign bank account

One of the most important questions we always ask our clients every year is if they have any foreign bank accounts. Why? Because the IRS does not mess around when it comes to US citizens maintaining foreign bank accounts and not properly reporting the information.

So, what does this mean for you? Basically, additional forms, such as the FBAR, will need to be filed if you have a financial interest or signature authority over any financial accounts outside of the United States that exceeds $10,000 USD at any time during the year. This means the maximum value in all your accounts, on any given day, reaches over $10,000 USD at any time during the calendar year.

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The purpose of the strict filing requirements and large penalties revolving around the FBAR has to do with the United States government working to identify people who may be using foreign accounts to work around United States Law.

In addition, the records of accounts required to be reported on the FBAR should be maintained up to five years after the due date of the form. The records should include:

  • Name maintained on each account
  • Number or other designation of the account
  • Name and address of the foreign bank or other person with whom the account is maintained.
  • Type of account
  • Maximum value of each account during the reporting year

When it comes to penalties for volition they can range from civil to criminal or both penalties may be applied. Also, the amounts may fluctuate for inflation.

  • Non-Willful Violation of Transaction – Foreign Financial Agency Transaction
    • Civil: Up to $12,291
  • Willful – Failure to File FBAR or retain records of accounts
    • Civil: Up to the greater of $129,210 or 50 percent of the amount in the account at the time of the violation
    • Criminal: Up to $250,000 or 5 years or both
  • Willful – Failure to File FBAR or retain records of account while violating certain other laws
    • Civil: Up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation
    • Criminal: Up to $500,000 or 10 years or both
  • Knowingly and Willfully Filing False FBAR
    • Civil: Up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation
    • Criminal: Up to $10,000 or 5 years or both

If you have further questions, please reach out to your CPA at Henry+Horne.

 

Meghan Metzger, MSA

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