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FBAR reporting deadline quickly approaching

The Internal Revenue Service (IRS) has issued a last-minute reminder that anyone with financial accounts located overseas may need to file a Report of Foreign Bank and Financial Accounts, which is done by use of Form 114, by June 30, 2015.

The report is not filed with the IRS, instead, it goes to the Treasury Department's Financial Crimes Enforcement Network (FinCEN). Also, the IRS points out that the form is only available online. 

Not certain if you need to file an FBAR? The basic criteria are the ownership or other authority over an overseas financial account with a value of more than $10,000 during the year.

Because these requirements set a low bar, if you have any accounts overseas, it is a good idea to make absolutely certain that you have filed an FBAR if you meet the criteria.

The FBAR, however, is not a substitute for IRS Form 8938, which is the Statement of Specified Foreign Financial Assets form. You may need to file both, but there are differences. Form 8938 only needs to be filed if the value of assets exceed $50,000 by the end of the calendar year or $75,000 at any point during the year, while the limit for FBAR is $10,000 at any point during the year.

You should pay special attention to that "any point during the year" requirement. Simply because an account balance at the end of the year was under the $10,000 threshold is no assurance that it did not trigger the reporting obligation at some time during the 12 months of the year. This could occur if the financial account is made up of stocks or other assets subject to market volatility.

The penalties for violations of these reporting requirements can be severe, especially if it is deemed "willful" by the IRS. Accurate disclosure on both forms can prevent these negative consequences.

Source: IRS.gov, "Last-Minute Reminder: Report Certain Foreign Bank and Financial Accounts to Treasury by June 30," June 23, 2015

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