All taxpayers are reminded about FBAR reporting this year, as the process has changed. If…
FBAR Reforms Recommended
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 Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).
However, FinCEN has recently made a number of proposals (RIN 1506-AB26) to revise its regulations. The proposed regulations would conform the FBAR filing deadlines to the new April 15 date, update the filing exemption for officers and employees with signature authority but no financial interest, and require filers with 25 or more accounts to begin reporting detailed information on each account on their annual FBAR filing.
- Any taxpayer who submits a timely extension request for their calendar year federal income tax return should automatically receive a corresponding extension to October 15 to file their FBAR;
- FinCen make available on its website a simple-to-complete electronic extension request for use by taxpayers who do not request a filing extension of their federal income tax return;
- FinCEN coordinate with tax preparation software vendors to ensure that both tax professionals and individual taxpayers have ready access for electronic filing of FBAR extensions through their products;
- FinCEN’s final regulations include a provision to grant an automatic extension until June 15 to FBAR filers located overseas or who maintain their books and records overseas;
- FinCEN permit taxpayers with signature authority but no financial interest in accounts whose filing requirements have been deferred since 2011 to not be required to file the deferred FBARs provided they would have qualified for the expanded filing exemption proposed by FinCEN; (currently the accounts need to be listed in Part IV of the FBAR)
- FinCEN allow filers with 25 or more accounts to provide the information as an attachment to their FBAR return; (currently the accounts need not be listed) and
- FinCEN continue to provide an exemption from filing an FBAR to officers and employees of certain federally-regulated entities for accounts over which they have signature authority but no financial interest.
FBAR compliance is difficult already and non-compliance penalties are extreme. We recommend some additional penalty reform recommendations, especially for non-willful cases (currently there is a $10,000 per account per year penalty).
We believe most of the AICPA’s user-friendly pro-taxpayer recommendations should be adopted by the government.