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When to Report Income Held in Foreign Banks

April 08, 2016

If you are a U.S. citizen or a resident alien, you are required to report and pay taxes on all income within and outside of the U.S. Additionally, you must also report on your tax return any foreign bank accounts or foreign investment accounts, even if those accounts do not generate any taxable income.

Foreign Bank and Financial Accounts (FBAR)

If you have a foreign financial account, including a bank account, brokerage account, mutual fund, unit trust, or any other type of foreign financial account that exceeds the $10,000 threshold at any time during a year, you need to file an FBAR (FinCEN Report 114) for that year. This form is filed separately from your income tax return.

To file this form, you need to be a U.S. citizen or a resident of the U.S., or any domestic legal entity such as a corporation, partnership, estate or trust.

The FBAR can be efiled using the Bank Secrecy Act (BSA) E-Filing System. If you file the FBAR as an individual, you do not need to register at BSA to file. However, tax professionals such as attorneys, CPAs, and enrolled agents are required to obtain an account to file an FBAR using BSA E-Filer.

Exceptions to Reporting

There are filing exceptions for these U.S. persons or foreign financial accounts:

  • Certain foreign financial accounts jointly owned by spouses
  • U.S. persons included in a consolidated FBAR
  • Correspondent/Nostro accounts
  • Foreign financial accounts owned by a governmental entity or an international financial institution
  • Owners and beneficiaries of U.S. IRAs
  • Participants in and beneficiaries of tax-qualified retirement plans
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account
  • Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust)
  • Foreign financial accounts maintained on a U.S. military banking facility (Review the FinCEN’s FBAR instructions for complete information on entities exempted from reporting.)

Filing Deadline

The FBAR is filed on or before April 15 of the year following the calendar year being reported. Beginning July 1, 2013, the FBAR must be efiled through the Financial Crimes Enforcement Network (FinCEN’s) BSA E-Filing System.

Certain taxpayers living abroad may also have to file FATCA-related Form 8938 with their tax return. Domestic filers may also be required to file Form 8938, which must be filed with their tax returns.