The Foreign Bank Account Report (FBAR), also technically referred to FinCen Form 114, is used to declare and report foreign financial accounts, as well as assets or interests. It was originally designed to help the federal government prevent offshore tax evasion or money laundering incidents from wealth stashed away in foreign financial accounts.
If you have offshore accounts or any form of accounts saved away elsewhere and are curious about filing FBAR, here’s everything you need to know about this declaration and who can file a joint FBAR.
What is Covered Under the FBAR
First, FBAR is the old term for what is now FinCEN 114. This is not technically a tax report because the assets and accounts declared do not generate taxes. It is administered by the Treasury Department for the sole purpose of informing the government about your foreign holdings. But remember that some foreign assets must be reported on an FBAR and Form 8938.
It is important to know about the bank and financial accounts covered by the FBAR report. Signature authority is often required on the following financial accounts:
- Checking bank accounts
- Deposits and Time Deposits
It also covers other accounts kept with a financial institution or any other person performing services equivalent to a financial institution. Additionally, FBARs also cover options accounts and commodity futures. Insurance policies and mutual funds are also included.
Who Should File FinCEN Form 114?
With the purposes and coverages stated above, it is important to recognize whether you are also required by the law to file FBAR. Below are some of the requirements on who should file this form
Individual Foreign Bank Account Holders
US citizens or resident aliens (Greencard owners) having financial accounts outside the United States whose aggregate value exceeds $10,000 USD at any point of the calendar year. This applies to anyone regardless of age or circumstance. Minors or people unable to file for themselves can have their guardians file on their behalf.
Joint Foreign Bank Account Holders
Joint account holders are required to file separate FBAR forms. Each of the forms reports the entire balance of the joint account. Spouses who own joint foreign bank accounts can file the FBAR jointly, but only if both of them only own the joint foreign account. If one of them owns other foreign financial accounts, then they must file separately. Additionally, foreign financial accounts kept in overseas military financial institutions are exempted from this requirement. The FBAR requirements for joint accounts with a non-US citizen are a bit more complicated.
Organizations and Companies with Foreign Accounts
Companies and organizations based in the US are also subject to the same FBAR requirements. This applies to corporations, partnerships, LLCs, estates, or trusts formed under the existing laws of the United States
What is the FBAR limit for married couples?
Generally speaking, taxpayers have to be married first before filing joint tax returns, and this also applies to FBAR. Therefore, couples who are not legally recognized do not enjoy the same advantages. Additionally, this definition varies from state to state, so you might want to check it first.
As mentioned above, the first restriction for married couples is that in order to file jointly, all their foreign holdings must be jointly owned as well. If one of the spouses owns another financial account without joint ownership with the other, then all foreign holdings must be declared separately.
According to the FinCEN website, the spouse of someone who filed an FBAR is no longer required by law to file his or her own, separate FBAR provided that the following conditions are met:
- All financial accounts of the non-filing spouse are jointly owned with the filing spouse
- The filing spouse has reported all joint accounts
- All filers have fully accomplished their respective Form 114a, also known as the Record of Authorization to Electronically File FBARs.
If these conditions are not met, then they have to file an FBAR separately. Additionally, each spouse must individually report the entire value contained in their jointly owned accounts. Unrelated (but still important) is learning what happens if you marry someone who owes back taxes.
Completing Form 114a for Foreign Financial Accounts
Spouses who are eligible can also designate who among the spouses through Form 114a. The same form is required for both parties before as a part of their FBAR filing requirements.
The designated spouse can then file their joint FBAR through the BSA E-Filing System. Filing spouse reports requires completing digital, electronically signed forms.
In the cases of people having foreign accounts before they got married, and have not taken any steps to establish joint ownership, they have to file separator FBARs. On the other hand, couples that only received their foreign accounts after the marriage, or have taken methods to establish joint ownership on the accounts, can file for joint FBAR.
Can a Married Couple File FBAR separately?
Yes, a married couple can definitely file their FBARs separately. However, for convenience purposes, they are allowed to file their FBARs jointly provided they meet a certain set of conditions.
For married couples where one is a non-resident alien, they are generally exempted from filing FBARs even if they are married to a US citizen or are residing in the United States. However, it is also important to note that some people who are not US citizens elect to be treated as US persons, under the Internal Revenue Code Section 6013, to file a joint income tax return with their US citizen or resident alien spouses.
In the context of FBARs, however, FinCEN clarifies that determining whether an individual is a resident “should be made without regard to elections under section 6013(g) or 6013(h) of the Internal Revenue Code.” Therefore, if an individual is not lawfully recognized as a permanent resident or not substantially present in the country are also not required to file an FBAR.
Ultimately, the conditions for filing an FBAR should be treated differently from filing income tax returns. Some people exempted from FBARs should still check whether they’re required to file IRS Form 8938. Lastly, before filing an FBAR jointly or separately, it is highly recommended to have your assets be reviewed by a tax professional.