It’s tax season but what does that mean for Americans who are living abroad? Along with filing taxes as an ex-pat, an FBAR also needs to be filed if you’re an American living in another country. But what exactly is an FBAR and why is it necessary?
Our guide will tell you everything you need to know about the FBAR and why you need to file one if you’re living abroad.
What is an FBAR?
If you’re an American living abroad or you have money in non-U.S. bank accounts, you may need to file an FBAR if you had over $10,000 in foreign financial accounts at any time in a year. Formally, FBAR stands for a Foreign Bank Account Record. In an attempt to stop people from cheating taxes by hiding money in offshore accounts, the IRS launched FBAR filing in 1970. This is in place to show the IRS all of your bank accounts on record.
With that said, the accounts you list on your FBAR won’t be taxed. While the FBAR is a required form, it’s purely informational and won’t mean any more taxes.
Why is Filing an FBAR Important?
Because the FBAR is a required IRS form, failing to report it can financially cost you. Whether you don’t file on accident or on purpose, you may be looking at fines of $10,000-$100,000. Although it might seem like just one more thing to worry about, it’s best to do it rather than putting it off and facing fines later.
What if I Forget?
If you unintentionally don’t file an FBAR, there are streamlined programs sponsored by the IRS that can help you get back in the black without paying any penalties. Instead of navigating these programs on your own, you may want to consider hiring an expat tax professional who is knowledgeable about FBAR filing and ex-pat taxes.
Who Needs to File an FBAR?
Any American who has offshore accounts with more than $10,000 in aggregate meets the threshold put in place by the U.S. Treasury. This doesn’t have to be in a single account, either. For example, if you have three offshore accounts with $3,000, $6,000, and $1,000 respectively, you’ll still need to file an FBAR and report all of your accounts.
How to File an FBAR
Your FBAR is due at the same time as your taxes. Typically, the deadline for the FBAR is by tax day, or April 15, though there’s an automatic extension to October 15. While you can file an FBAR on paper, it’s much easier and more convenient to do so online. Sign up to file online through finCEN or ask for help from an international tax expert.
While filing, be sure to answer all required questions thoroughly and honestly. Lying on the FBAR is a crime and you could be charged with perjury as a result. After answering all of the questions, you just need to submit the FBAR and you’re free to go.
If you’re married, both you and your spouse need to file individual FBAR forms. With that said, if both of you own the account and neither of you has an individual account anywhere else, you can file a joint FBAR.