Is your nonprofit involved in activities in foreign countries? This includes operating an orphanage, conferences, mission work or any other type of program activity. If so, your organization may find it necessary to open a bank account in that country. Once you decide to do that, Form 114 may be required for you to file to the Financial Crimes Enforcement Network (FinCEN).
So, who is FinCEN and why are they important? FinCEN is an agency of the U.S. Department of Treasury that collects financial data to fight against money laundering, terrorist financing, and other various financial crimes. Form 114 is used to report Foreign Bank and Financial Accounts (FBAR). Since the introduction of the Bank Secrecy Act in 1970, FinCEN form 114 must be filed by your organization if you meet certain criteria. It’s important to note that form 114 is not filed with your taxes and not every organization with a foreign financial account must file. So, what are the criteria?
According to the IRS website, FinCEN Form 114 is used to report either a financial interest in (owner and holder of legal title or title held by agent), or signature authority of a foreign account. Form 114 is required to be filed for any U.S. persons (including U.S territories and U.S. territory entities) that have a foreign account that has had a balance of $10,000, or more, at any time during the calendar year. This can include a bank account, brokerage account, mutual fund, trust, etc. The highest value the account has reached is determined by using periodic account statements to pin point the peak amount (in the currency of the account).
FinCEN form 114 must be submitted by April 15 and, fortunately, an automatic six-month extension is filed for anyone who fails to meet the original deadline. Persons can file electronically through FinCEN’s BSA E-Filing System. Penalties can be severe depending on if failure to file form 114 was “non-willful” or “willful”. If a person is not aware they were required to file, a penalty up to $10,000 can still be given (hopefully that’s not all they have in their account). If not filing is determined to be “willful”, the penalty can be up to $100,000 or 50 percent of their account balance. Criminal penalties may also apply. “Ignorance is bliss,” applies to some situations, but when it comes to the U.S. Treasury, ignorance is expensive.