Are you a U.S. citizen or a green card holder? Do you have any foreign accounts? If so, you may be required to file an FBAR. The Foreign Bank Account Report (FBAR), also known as FinCEN Form 114, is a report filed with the United States Treasury Department that discloses information about your foreign bank and financial accounts. Contrary to popular belief, this form is not part of your taxes.

Failing to file an FBAR can result in significant penalties, so it's essential to understand your obligations and file this form correctly. This blog post will cover everything you need to know and tell you how to file your FBAR with Canua in just 5 minutes!

What is the FBAR?

FinCEN Form 114, more commonly referred to as the Foreign Bank Account Report or FBAR, is a form you must file with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury each year. The FBAR reports any financial interest in or signature authority over foreign accounts, such as bank accounts, brokerage accounts, and mutual funds.

The history of the FBAR

The FBAR was created in 1970 as part of the Bank Secrecy Act to combat money laundering and other financial crimes. In 2003, the USA PATRIOT Act expanded the reporting requirements of the FBAR to include any foreign financial account to combat terrorist financing. While it's dubious that the FBAR has accomplished either of these goals, your reporting requirement remains, so keep reading.

When is the FBAR due?

The FBAR must be filed electronically through FinCEN's Bank Secrecy Act E-Filing System and is due on April 15th of each year. However, FinCEN grants an automatic extension of the filing of up to 6 months. The extension is automatic, and taxpayers are not required to file a separate form to request it. So, in reality, the FBAR is due on October 15th of each year.

Who has to file the FBAR?

There are two tests to determine if you have to file an FBAR:

1. Are you a U.S. Person who has ownership or signature authority over one or more foreign bank accounts and;
2. Was the combined value of those accounts over $10,000 at any time during the year?

Who is a U.S. Person?

A U.S. person is a citizen of the United States, a resident alien of the United States, or an entity organized under the laws of the United States (including foreign branches of U.S. corporations). "Resident aliens" are a fairly broad category but include anyone who isn't a U.S. citizen but legally resides in the U.S. For example, Green Card holders, holders of work visas, etc. For more information on how to determine if you're a resident alien or not, you can read through the IRS's very descriptively named document on the subject, Publication 519.

Which accounts do I need to include in my FBAR?

Foreign accounts include, but are not limited to:

• Bank accounts (checking and savings) held in foreign banks or foreign branches of U.S. domiciled banks
• Securities accounts (all your brokerages and stock trading apps fall into this category)
• Insurance policies or annuity contracts with cash value
• Mutual Funds
• Retirement and Pension accounts
• Debit and prepaid credit cards
  

One important note: the FBAR currently does not require reporting on cryptocurrencies, so you don't have to report any wallets or exchange accounts on your FBAR.

Is the FBAR only for individuals?

The FBAR is not only for individuals. Any entity that is a "U.S. person", as defined by the IRS, must file an FBAR if they meet the criteria previously mentioned. These entities include, but are not limited to:

• Sole Proprietorships
• Corporations
• Partnerships
• Limited Liability Companies
• Trusts
• Estates

Can you file a joint FBAR?

Yes! If you are married and jointly own foreign financial accounts with your spouse, you can file a single FBAR that reports both of your interests in the account. You must include your spouse's name, address, date of birth, and social security number.

However, if your spouse has any separately owned accounts, you must file your FBARs separately, each including your jointly held accounts.

Filing the FBAR on behalf of minors

If you are the parent or guardian of a child, you may need to file an FBAR on their behalf. For more information, you can read FinCEN's guidance on FBAR filing requirements for minors.

What happens if you don't file an FBAR when you should?

If you should have filed an FBAR but did not, the IRS may impose a civil penalty of $10,000 per violation. In cases of "wilful violations," the penalty is increased to the greater of $100,000 or 50% of the amount in the account at the time of the violation.

Additionally, failing to file an FBAR can result in criminal penalties. The maximum criminal penalty for willful failure to file an FBAR is $250,000 and/or five years in prison. For non-willful violations, the maximum penalty is $100,000.

It's important to note that these are per violation penalties. So, if you have multiple accounts that should have been reported on your FBAR but were not, you will be subject to multiple penalties.

What should I do if I haven't filed my FBAR in previous years?

Fortunately, the IRS has set up a special voluntary disclosure program for taxpayers who have failed to file an FBAR in prior years. This program allows taxpayers to come forward and file any delinquent FBARs without facing any of the penalties above.

Common mistakes to avoid when filing your FinCen form 114

Now that you know a little bit more about the FBAR and who needs to file one, let's go over some of the most common mistakes people make when filing their FBAR.

1. Not filing an FBAR at all: Remember, if you meet the criteria of a U.S. person as defined by the IRS and you have signature authority or interest in foreign financial accounts that exceed the $10,000 limit, you are required to file an FBAR.
2. Assuming that the $10,000 filing threshold applies on an account-by-account basis: The reporting limit is based on the total value of all foreign accounts that meet the criteria of a "financial account".
3. Failing to file an FBAR by a U.S. corporation, partnership, LLC, trust, or estate: These fall within the definition of a U.S. Person. Remember, any "U.S. person" entity must file an FBAR if they have signature authority or financial interest in foreign accounts. These institutions must file FinCEN Form 114 if the owner is not a U.S. taxpayer. Trustees also need to be aware that they may be required to file an FBAR in the case where the trustee has signature authority over foreign financial accounts held for the benefit of others.
4. Failing to report beneficial ownership: Beneficial ownership means that you have the right to use or direct the use of the account even though you may not be the legal owner of the account.
5. Not filing an FBAR for minor children: Parents or guardians should be aware that they may need to file on behalf of their minor children if the child has foreign financial accounts.

By avoiding these common mistakes, you can ensure that you comply with filing requirements.

FBAR reporting best practices

If you have a foreign bank account, here are some best practices to keep in mind:

• Keep records of your accounts, including bank statements and the names of each account holder.
• Make sure you know the account number and types of accounts you have, as well as the name and address of each institution.
• Be aware of the maximum value of each account - this will help you determine whether or not you need to file an FBAR each year.
  

If you're finding it difficult to keep track of all this data while juggling the rest of your life, then Canua is your solution.

How to file your FBAR with Canua in just 5 minutes

Canua makes it easy to file your FBAR in just a few minutes. All you need to do is connect your bank accounts, investment accounts, and other financial accounts.

If your bank doesn't give us enough historical data, you may need to use our CSV import tool to backfill that historical transaction data using your bank statements. Since we keep your accounts in sync from now on, you'll only have to import those historical transactions once.

We'll then automatically generate your FBAR and file it electronically with FinCEN on your behalf and send you a confirmation as soon as FinCEN has confirmed your filing.

Filing your FBAR with Canua is the easy, painless way to ensure that you comply with FinCEN's foreign bank account reporting requirements. So why wait? Get started today and take care of your FBAR filing in just a few minutes.

If you'd like to learn more about how Canua can help you with your FBAR filing requirements, please visit our website or contact us at support@canua.com. We're always happy to help!