Did you know the US has a Financial Crimes Enforcement Network (FinCEN)? The main function of this government bureau is to prevent and punish any financial crime.
To fulfill its duties, FinCEN can issue and interpret relevant regulations. One of these regulations is related to reporting foreign bank and financial accounts.
The way to report foreign accounts is through FinCEN Form 114, most commonly known as the "FBAR" or Foreign Bank Accounts Reporting Form.
This form is filed when a US citizen or resident has financial interest in or signature authority over foreign (non-US) financial accounts with an aggregate value of over $10,000 at any time during the calendar year.
It's important to be aware that this form serves as a disclosure of foreign financial accounts only and does not produce a tax liability. Tax liabilities arise when there is generation of income so the interest earned in those foreign bank accounts would be what would increase your tax liability on your tax return.
The FinCEN Form 114 is due April 15 following the calendar year reported. The form is eligible for extension to October 15. You may choose to file it electronically or your CPA may file it for you. Both civil and criminal penalties can be charged against those failing to meet filing requirements so it is imperative to know your obligations.
This image portrays a simple example of when a person is required to file FinCEN Form 114. As you can see, the aggregate value of the two bank accounts exceeds $10,000 on July 1st so both bank accounts must be disclosed.
Click here to read more about the Financial Crimes Enforcement Network.
This post may not contain a complete analysis of the tax issues discussed herein and does not represent official conclusions or advice regarding the matter.