Many forget or get confused about FBAR requirements for Americans abroad. But it’s important to understand that failure to file the FBAR will lead to penalties and the attention of the IRS. We have gathered 10 important facts, which you need to know about FBAR reporting.
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How do Americans abroad report FBAR on FinCEN Form 114?
On FinCEN Form 114, a taxpayer needs to report foreign financial assets according to certain requirements. They include but are not limited to bank, securities, and financial instruments accounts; mutual funds, and you, as the account holder, have an equity interest in the fund; brokerage account, trust, and insurance policies or annuity contracts with a cash value, etc.
Filing an FBAR for Americans abroad is required if the total (aggregate) value of all of your financial assets is over $10,000 on any day in the tax year. It is can be a quite confusing situation for taxpayers who aren’t the main holders of a financial account. Americans abroad mistakingly think they don’t need to disclose the foreign account on FBAR in this case. Well, you need to know that even the nominee must still file the form if the threshold was met.
Example: American abroad has 2 different overseas financial accounts. He has $3,400 in one and $6,600 in another, he must report both accounts on Form 114.
What you do not need to claim on the FBAR: domestic mutual funds that invest in foreign stocks and personal property held directly. Americans in Canada, check out this blog post about tax traps for you.
Read more here.