Optima Tax Relief Reviews how to Report Foreign Bank and Financial Accounts
U.S. individuals who hold financial accounts overseas for a variety of legal and legitimate reasons, including convenience and access, are required to file Reports of Foreign Bank and Financial Accounts (FBAR). This is because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.
The FBAR is used by the U.S. government to identify individuals who use foreign financial accounts to avoid U.S. law. The government can use FBAR information in order to identify or locate funds that are being used for illegal purposes. The FBAR tool can also be used to identify unreported income that was maintained or generated abroad.
Optima Tax Relief goes over the requirements for taxpayers that need to report their foreign banks and financial accounts. The Bank Secrecy Act (BSA) requires U.S. individuals to file an FBAR if they have:
- Financial interest in, signature authority or other authority over one or more accounts, such as bank accounts, brokerage accounts, and mutual funds, in a foreign country.
2.The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.
A foreign country includes any area outside the United States, Indian lands and the following U.S. territories and possessions:
- Northern Mariana Islands
- District of Columbia
- American Samoa
- Guam
- Puerto Rico
- United States Virgin Islands
- Trust Territories of the Pacific Islands
Individuals who are required to report their foreign accounts are recommended to file the FBAR electronically using the Financial Crimes Enforcement Network. Taxpayers do not need to file an FBAR with their federal individual, business, trust or estate tax returns.
If two individuals jointly own a foreign financial account, or if multiple people each own a partial interest in an account, then each person has a financial interest in that account and each person is required to report the entire value of the account on an FBAR.
Spouses do not need to file separate FBARs if they complete and sign Form 114a, Record of Authorization to Electronically File FBARs PDF, and:
- All reportable financial accounts of the non-filing spouse are jointly owned with the filing spouse.
- The filing spouse reports all accounts jointly owned with the non-filing spouse on a timely filed FBAR.
Otherwise, both spouses must file separate FBARs, and each spouse must report the entire value of the jointly owned accounts.
