Reporting requirements

Report of foreign bank and financial accounts (FBAR)

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the IRS by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). See the "Who Must File an FBAR" section below for additional criteria.

Who must file an FBAR

United States persons are required to file an FBAR if:

  • The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  • The aggregate value of all foreign financial accounts exceeded USD 10,000 at any time during the calendar year to be reported.

United States person includes US citizens; US residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the reporting requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:

  • Certain foreign financial accounts jointly owned by spouses;
  • United States persons included in a consolidated FBAR;
  • Correspondent/nostro accounts;
  • Foreign financial accounts owned by a governmental entity;
  • Foreign financial accounts owned by an international financial institution;
  • IRA owners and beneficiaries;
  • Participants in and beneficiaries of tax-qualified retirement plans;
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
  • Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
  • Foreign financial accounts maintained on a United States military banking facility.

Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and must be filed on or before June 30 of the year following the calendar year being reported. The FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.

A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed  USD 10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of USD 100,000 or 50% of the balance in the account at the time of the violation, for each violation.  For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance, FIN-2013-G002 (June 24, 2013).

US taxpayers holding foreign financial assets may also need to file Form 8938

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. Form 8938 is attached to the annual return Form 1040.

Form 1099 is due as well

Form 1099 is used to report different types of taxable income. The letters behind the 1099 indicate which type of form you are dealing with:

Form 1099-B reports the sale of stocks, bonds, mutual funds and other securities.
Form 1099-C reports debts that were canceled
Form 1099-DIV reports dividends, qualified dividends, and capital gains distributions.
Form 1099-G reports payments from state governments such as unemployment compensation and state tax refunds.
Form 1099-INT reports interest earned.
Form 1099-MISC reports various types of income including rents, royalties, and non-employee compensation.
Form 1099-MSA reports distributions for a medical savings account.
Form 1099-OID reports original issue discount income.
Form 1099-PATR reports patronage dividends paid by a cooperative.
Form 1099-R reports distributions from a retirement plan such as an IRA, 401(k) or pension.
Form 1099-S reports proceeds from the sale of real estate.
Form SSA-1099 reports Social Security benefits paid.
Form RRB-1099 reports railroad retirement benefits.

The qualified Swiss custodian bank you hold your account with will provide you with the required documents.

Find your reporting and tax expert here.


Text, picture and video source: irs.gov irsvideos.gov IRS

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