Those who have business or personal ties in a foreign country prior to 2013, including foreign bank accounts, securities accounts, other financial accounts, or even signature authority over such an account must file special paperwork, namely Form TD F 90-22.1, also known as the Report of Foreign Bank and Financial Accounts or FBAR.

The following is an overview of the specifics related to each form.

Foreign Bank and Financial Account (FBAR), Form TD F 90-22.1

When it must be filed:

The FBAR should be filed when the aggregate value of any combination of the above listed account types exceeds $10,000 at any point during a given calendar year.

When it is due:

The FBAR is due by June 30 of the year following the calendar year for which it applies. So forms that apply to 2013 are due by June 30, 2014.

Penalties for failure to file:

There are potential civil and criminal penalties for not filing. The civil penalty for a non-willful violation will not exceed $10,000 per violation. The per-violation, civil penalty for a willful violation will not exceed the greater of either $100,000 or 50% in the account at the time of the violation. Finally, the criminal penalty for a willful violation is a fine that is not to exceed $250,000, or a period of imprisonment that must not exceed five years, or, in some cases, both.

After 2013, if you have a foreign account holder, you may be required to file US Treasury Form FinCEN 114, Report of Foreign Bank and Financial Accounts. This form replaces form TD F 90-22.1 and is not filed with your tax return. FinCEN Form 114 must be obtained from the Bank Secrecy Act’s Financial Crimes enforcement Network and filed electronically on their website.

Form 8938

When it must be filed:

An individual must file Form 8938 if their interest in one or more specified foreign financial assets has an aggregate fair market value that exceeds either $50,000 on the final day of the tax year, or, $75,000 at any point during the tax year. For a joint return, those numbers rise to $100,000 and $150,000 respectively.

A specified individual (a U.S. citizen, a U.S. resident alien for any part of the tax year, and a nonresident alien who makes an election to be treated as a U.S. resident alien) living outside of the U.S. who is also a qualified individual according to Code Sec. 911, must file the form if: The value of the specified foreign financial assets in which the interest exceeds $200,000 on the last day of the tax year, or $300,000 at any point during the year. These numbers rise to $400,000 and $600,000 respectively.

It is important to note that the form need not be filed in any tax year during which an individual is not required to file an annual return.

What are specialized foreign financial assets?

Specialized foreign financial assets are financial accounts maintained by foreign financial institutions and other assets not held in accounts maintained by financial institutions, including: stock and securities issued by non-U.S. persons, financial instruments or contracts with issuers or counterparties that are non-U.S. persons and interests in certain foreign entities.

Penalties for failure to file:

The penalty for failure to file a Form 8938 is $10,000, initially. If the failure to file continues for a period that exceeds 90 days following the mailing of a notification from the IRS, additional $10,000 penalties are imposed for every 30-day period (in full or in part) thereafter, up to a maximum penalty of $50,000.

If you are in a position where you need to file an FBAR or Form 8938, or need clarification related to either, contact Convergence CPA Group, one of the premiere CPA firms Denver has to offer.

Convergence CPA Group is a highly credible CPA firm in Denver, Colorado