If you maintain a foreign financial account, which could be a bank account, a mutual fund, a brokerage account, or any other sort of account, that contains a collective value of $10,000, you may be requested by the Bank Secrecy Act to report your account annually to the Department of Treasury through electronic filing. The Report of Foreign Bank and Financial Accounts, FBAR, is a form that must be recorded directly with the office of Financial Crimes Enforcement Network, or FinCEN.
Those who complete this form must detail the maximum value of financial accounts upheld by a financial institution positioned in a foreign country. The reporting responsibility is also met by responding to queries on a tax return about your foreign accounts. If the form is not completed, a penalty of up to $10,000 or above, as well as criminal consequences, could be headed your way.
However, there are exceptions to this rule. According to the IRS, you may be exempt from this form if you:
It’s important to note that the balance has to be cumulative, indicating that if you have a pooled account balance of $10,000 at one time, but split the amount between two accounts, both accounts must be reported. To learn more, reference the IRS website here.
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For more information on this topic, please reach out to Wiss’ Tax Department at 973.994.9400 or at [email protected].