Which Accounts are Reported on the FBAR: 5 Common Types

Which Accounts are Reported on the FBAR?

Which Accounts are Reported on the FBAR?

Which Accounts are Reported on the FBAR: When it comes to foreign account reporting, one of the most common forms a US person with offshore accounts may have to file is the FBAR. The FBAR is used to report foreign bank and financial accounts to the US Government. Technically, the form is referred to as FinCEN Form 114. Unlike a tax return, the FBAR is not used to report foreign income, but rather is required to report the the accounts’ maximum account value during the year. The form is not filed with the IRS but is instead submitted electronically to FinCEN (Financial Crimes Enforcement Network) directly on their website.  The failure to file the FBAR may result in foreign account penalties, but these penalties may be avoided, minimized or abated by using one of the approved offshore amnesty programs.

Let’s review 5 common types of accounts that are reported on the FBAR:

5 Common Accounts Which are Reported on the FBAR

Here are 5 types of accounts reported on the FBAR:

Bank Accounts

As you would probably discern from the name of the form, bank accounts are reported on the FBAR.

It does not matter if the accounts are dormant or active, and it does not matter if the account generates any income. Bank accounts in general are reported on the FBAR.

Investment Accounts

Investment accounts are also reported on the FBAR.

There are many different types of investment accounts, depending on what country you reside. You may possibly have a Demat in India, an ISA in the UK, or a Mutual Fund Account in Spain. Nevertheless, when you have an investment account — even if you do not consider it to be an account per se — it is reported on the FBAR.

Life Insurance Policies

Not all life insurance policies are reported on the FBAR.

Generally, when a foreign life insurance policy has a surrender value or a cash value, then you have to report it on the FBR. One important fact to keep in mind is that you are not reporting the payout value, but rather the surrender value.

For example, while a policy may have a $250,000 face value, it is only worth $30,000 if you were to surrender it today — and therefore you report the $30,000 surrender value on the FBAR.

Pension Accounts

Pension accounts overseas are also reported on the FBAR.

We work with over 80+ different countries, and each country typically has its own type of pension system. Whether it is a Superannuation in Australia, a Provident fund in Hong Kong or Singapore, or a retirement plan in Sweden — the pension is reportable.

Many countries have something called a Pillar system. Typically Pillar 1 (Social Security or OASI) is not the type of “account” that is reported on the FBAR, but rather pillar 2 (occupational) or pillar 3 (personal) accounts are reported on the FBAR.

Dormant Accounts

A final important note about FBAR reporting is that the account does not have to be active in order for it to be reported. Many times, taxpayers come to us with prior year FBARs that are missing dormant or inactive accounts — and some of these counts are very significant in value. The reason the taxpayer did not report the account was because the account was not active, and so they presumed it was not reportable — but being active is not a requirement for FBAR reporting.

In conclusion, the FBAR requires US persons with foreign bank and financial accounts to report the information each year on an annual FBAR — when they meet the threshold requirements for reporting.  The filing requirements go far beyond just bank accounts, and since the IRS has taken to issuing large penalties for noncompliance , if you are out of compliance you should consider getting into compliance before you are penalized.

Our FBAR Lawyers Represent Clients Worldwide

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure. 

Contact our firm today for assistance.