Do You Qualify for an FBAR Exception to Filing: Golding & Golding
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Do You Qualify for the FBAR Exceptions?
Each year, US Persons who have foreign bank and financial accounts that exceed the threshold for reporting are required to report the maximum value of their accounts on the FBAR (aka FinCEN Form 114, Foreign Bank and Financial Account Reporting). In general, the FBAR Form is less complex than other international information reporting forms such as Form 5471 and Form 3520-A –– although that does not make it any less of a headache for taxpayers who are required to file the form. Depending on where a person’s foreign financial institution is located and the type of records they maintain, may make it very difficult for some US Persons to obtain information such as the maximum account value — which is otherwise (usually) readily available for US accounts. There are some exceptions to having to file, although unfortunately they typically do not impact individuals with common foreign accounts such as bank accounts or foreign pension plans. Let’s go through some of the basics of the FBAR exceptions:
As provided by the IRS:
Filing Exceptions to FBAR
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The following persons are excepted from the FBAR filing requirement:
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Consolidated FBAR. A U.S. person that’s an entity named in a consolidated FBAR filed by a greater than 50% owner doesn’t need to file a separate FBAR.
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Individual Retirement Account (IRA) owners and beneficiaries. An owner or beneficiary of an IRA located in the U.S. doesn’t need to report a foreign financial account held by or on behalf of the IRA
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Participants in and beneficiaries of tax-qualified retirement plans. A participant in or beneficiary of a retirement plan described in Sections 401(a), 403(a), or 403(b) of Title 26 of the United States Code (Internal Revenue Code) doesn’t need to report a foreign financial account held by or on behalf of the retirement plan.
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Trust beneficiaries. A beneficiary of a trust in which the beneficiary has a financial interest (defined in “Financial Interest” above) doesn’t need to report the trust’s foreign financial accounts on an FBAR if the trust, trustee of the trust, or agent of the trust is a U.S. person, and files an FBAR disclosing the trust’s foreign financial accounts.
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Officers or employees with signature or other authority in certain situations. Individuals who have signature or other authority over, but no financial interest in a foreign financial account don’t need to report the account in the following situations:
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An officer or employee of a bank examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, or the National Credit Union Administration doesn’t need to report signature or other authority over a foreign financial account owned or maintained by the bank.
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An officer or employee of a financial institution registered with and examined by the Securities and Exchange Commission or Commodity Futures Trading Commission doesn’t need to report signature or other authority over a foreign financial account owned or maintained by the financial institution.
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An officer or employee of an Authorized Service Provider doesn’t need to report signature or other authority over a foreign financial account owned or maintained by an investment company registered with the Securities and Exchange Commission. An Authorized Service Provider is an entity registered with and examined by the Securities and Exchange Commission and serves an investment company registered under the Investment Company Act of 1940.
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An officer or employee of an entity that has a class of equity securities listed (or American depository receipts listed) on any U.S. national securities exchange doesn’t need to report signature or other authority over a foreign financial account of that entity.
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An officer or employee of a U.S. subsidiary doesn’t need to report signature or other authority over a foreign financial account of the subsidiary if its U.S. parent has a class of equity securities listed on any U.S. national securities exchange and the subsidiary is included in a consolidated FBAR report of the U.S. parent.
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An officer or employee of an entity that has a class of equity securi – ties registered (or American depository receipts in respect of equity securities registered) under Section 12(g) of the Securities Exchange Act doesn’t need to report signature or other authority over a foreign financial account of that entity.
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Foreign Accounts Excepted from FBAR
The following types of foreign financial accounts are excepted from the FBAR filing requirement:
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Certain accounts jointly owned by spouses. The spouse of an individual who files an FBAR doesn’t need to file a separate FBAR if certain conditions are met as previously discussed. Refer to “Reporting Jointly Held Accounts.”
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Correspondent or nostro accounts (maintained by banks and used solely for bank-to-bank settlements) don’t need to be reported.
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Foreign financial accounts of any governmental entity don’t need to be reported. Example: A state administered college or university doesn’t need to file an FBAR because it’s a governmental entity.
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Foreign financial accounts of any international financial institution (if the U.S. government is a member) doesn’t need to be reported. Examples are the World Bank and the International Monetary Fund.
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Financial accounts located in a U.S. Military banking facility. A financial account maintained with a financial institution located on a U.S. military installation doesn’t need to be reported, even if that military installation is outside the U.S.
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