What is FBAR reporting? Who needs to repot? In this article, we are discussing the details of FBAR reporting, who and when you must report.
United States persons which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts or signature authority in any financial accounts outside of the USA and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year, must report to the Treasury Department every year.
As oppose to FATCA, resident aliens include residents of U.S territories and U.S. territory entities, are subject to FBAR reporting.
Financial accounts include savings accounts, checking accounts, and time deposits, Securities accounts, brokerage accounts for securities derivatives, financial instruments, Commodity futures, options accounts, insurance policies with a cash value, Mutual funds, pooled funds, any other accounts maintained in a foreign financial institution or with an entity performing the services of a foreign financial institution.
Financial interest includes when a United States person is the owner of the record of the holder of legal title, and whether the account is maintained for benefit of the US person or for the benefit of someone else, including non-US persons.
The owner of the record of the holder of legal title includes a person, an agent, a nominee, an attorney, or a person acting on behalf of the US person.
The owner of the record or the holder of legal title can be a corporation in which a US person owns directly or indirectly: (i) more than 50% of the total value of shares capital; or (ii) more than 50% of the voting right.
The owner of the record or the holder of legal title can be a partnership in which the US person owns directly or indirectly: (i) an interest in more than 50% of the partnership’s income (distributive share of partnership income taking into account any special allocation agreement); or (ii) an interest in more than 50% of the partnership capital.
The owner of record or holder of legal title can be a trust of which the US person: (i) is the trust grantor; and (ii) has an ownership interest in the trust for US federal tax purposes.
The owner of the record or the holder of legal title can be a trust in which the US person has a greater than 50% beneficial interest in the assets or income of the trust for the calendar year.
The owner of the record or the holder of legal title can be any other entity in which the US person owns directly or indirectly more than 50% of the voting right, total value of ownership interest or assets, or interest in profits.
Signature authority is the authority of an individual (himself/herself or jointly with another individual) and control the direction of funds held in a foreign financial account by direct instruction (whether in writing or otherwise) to the foreign bank or other foreign financial institution that maintains the foreign financial account.
In case of two persons jointly maintaining a foreign financial account, or if many persons and each own a partial interest in a foreign account, then each US person has a financial interest in that account and each US person must report the entire value of the account on an FBAR.
Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.