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Post date: Jan 26, 2014 9:00:27 AM

What is FBAR

FBAR known as "Report of Foreign Bank and Financial Accounts” is a report to be filed with IRS by anyone having a financial interest or a signature authority over a foreign account (such as a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds).

The reporting requirement is governed by the Bank Secrecy Act. The FBAR is strictly an informational return and no taxes on any reported amounts are assessed.

Financial Interest (Definition)

You or your agent or representative is the owner of record or holder of legal title; you have a sufficient interest in the entity that is the owner of record or holder of legal title.

Signature Authority (Definition)

You have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.

Effective date

FBAR regulations became effective from March 28, 2011, and apply to FBARs required to be filed with respect to foreign financial accounts maintained at any time during calendar year 2010, and with respect to all subsequent calendar years.

Types of Foreign Assets and Whether They are Reportable

The following assets are reportable.

1. Financial (deposit and custodial) accounts held at foreign financial institutions.

2. Financial account held at a foreign branch of a U.S. financial institution.

3. Foreign financial account for which you have signature authority.

4. Foreign stock or securities held in a financial account at a foreign financial institution.

5. Indirect interests in foreign financial assets through an entity (If share of interest is >50% in the entity).

6. Foreign mutual funds.

7. Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor.

8. Foreign-issued life insurance or annuity contract with a cash-value.

The following assets are not reportable.

1. Financial account held at a U.S. branch of a foreign financial institution.

2. Foreign stock or securities not held in a financial account.

3. Foreign partnership interests.

4. Domestic mutual fund investing in foreign stocks and securities.

5. Foreign hedge funds and foreign private equity funds.

6. Foreign real estate held directly or through a foreign entity.

7. Foreign currency held directly.

8. Precious Metals held directly.

9. Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles.

When to file (Due date)

The FBAR is a calendar year report, which must be filed with the Department of Treasury on or before June 30 of the year following the calendar year reported. Generally, extensions of time to file an FBAR are not granted. The report need to reach treasury dept by June 30th.

Who is required to file

Each U.S. person including U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold is required to file a FBAR using Form TD F 90 -22.1 for each year.

Non resident aliens are not subject to FBAR.

Threshold limit

The threshold limit for filing FBAR is $10,000 at any time during the calendar year.

How to file

Paper Filing- Mail your completed and signed TD F 90-22.1 to the Treasury Department at the following address:

Department of the Treasury

Post Office Box 32621

Detroit, MI 48232-0621

Paper filing was acceptable until June 30th 2013. Do not mail TD F 90-22.1 with your tax return, and do not mail the form to the IRS.

E-Filing (Mandatory)- Effective July 1, 2013, e-filing of FBARs is mandatory. No manual filing is accepted. Acknowledgement is issued for each filing. File electronically through FinCEN’s BSA E-Filing System.

(http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html).

How are maximum accounts or asset values determined and reported?

Use periodic account statements to determine the maximum value in the currency of the account. Convert to U.S. dollars using the end of the calendar year exchange rate and report in U.S. dollars.

What is Reported

Maximum value of financial accounts (along with the details of the account) maintained by a financial institution physically located in a foreign country. However contents of the account (such as transaction details) are not reported.

Penalties

A $10,000-per-year penalty can apply even if your failure to file a FBAR is an oversight. If the IRS can show you purposely avoided the FBAR reporting obligations, the penalties can be as high as:

$100,000, or

50% of the greatest value of the account

Taxpayers who intentionally avoid FBAR reporting can face criminal charges.

IRS Income tax returns filing

The FBAR is not to be filed with a federal tax return (1040, 1040A, 1040NR) which is due on April 15th of each year.

More information’s

More information about FBAR is available at

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR