updated 2:57 PM CEST, Sep 21, 2023

Are the FBAR regs fit for purpose – FinCEN wants to know by next Friday

FinCEN, the U.S. Treasury Department bureau that's responsible for overseeing the receipt of Foreign Bank Account Reports, is inviting comments "on the proposed renewal, without change, of existing information collection requirements concerning reports of foreign financial accounts and... Report[s] of Foreign Bank and Financial Accounts (FBAR)".

The deadline for written comments to be filed is next Friday (Jan. 15), according to a notice on the Federal Register's website, posted back in November. 

According to the notice, this request for comments on the part of FinCEN (Financial Crimes Enforcement Network, which exists to combat domestic and international money laundering, terrorist financing and so on), "is made pursuant to the Paperwork Reduction Act of 1995."

Those interested in filing a comment with FinCEN should do it either the Federal "E-rulemaking Portal" located at http://www.regulations.gov (where they would be told to follow the instructions found there for submitting comments, and make reference to Docket No. FINCEN-2020-0013 and the specific Office of Management and Budget (OMB) control number 1506-0009), or else post them by mail to FinCen at: Policy Division, Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA 22183.

Again, any comments made this way should refer to the Docket No. and OMB control number given above.

FBARs: known
for harsh penalties

As recent articles in this publication and others have highlighted recently, the penalties handed out to American taxpayers who are found to have failed to file FBARs can be surprisingly harsh – potentially equivalent to 100% of the highest amount held in non-U.S. financial accounts, in fact, if they're found to have been "wilful" in their failure to comply with the reporting rules.

As we reported here last May, for example, a U.S. taxpayer in Florida was hit with almost US$13m in FBAR penalties. The title for the largest FBAR penalty ever, though, is still believed to be held by a University of Rochester, New York professor named Dan Horsky, who was hit with a US$100m assessment in 2016, before he was sentenced in February 2017 to seven months in prison for a tax evasion scheme that was said to have relied on Swiss bank accounts.

FBARs, which are also known as "FinCEN Report 114s", must be filed every year by Americans who are resident in the U.S. or abroad, alongside their basic 1040 tax returns, if their offshore bank and financial account holdings total US$10,000 or more at any time during the U.S. tax year, which runs January to December.

Even if it's only for a day. Even if the money is spread out across several accounts, none of which have had US$10,000 in them all year. Even if, on the day the FinCEN Report is filed, the account or accounts in question don't have so much as a penny in them any more.

What's more, "a common misconception with FBAR filing is that a single foreign financial account has to have over US$10,000 in it before it should be reported," says Katelynn Minnott, managing CPA and partner of Bright!Tax, an online provider of U.S. tax advice and services for expatriate Americans around the world.

"But in fact, the US$10,000 minimum value refers to the combined balances of all the foreign financial accounts of the taxpayer, including any accounts that they have signatory authority over even if they're not registered in their own name, such as a business bank account."

Officially FBARs are due on April 15, to coincide with Tax Day in the U.S. (Expats have until June 15 to file their tax returns.)

'Signature authority' deadline
(again) pushed back

In another FBAR-related development, FinCEN last month posted a notice that extended the time by when "certain Report of Foreign Bank Accounts filings" needed to be filed.

Specifically, in its Notice 2020-1,  FinCEN said that because certain rules proposed in 2016 still have yet to be finalized, certain taxpayers whose filing deadline for "reporting their signature authority" – which has already been repeatedly extended – has again been moved back, to April 15, 2022.

This is said to refer specifically to taxpayers who have signature authority over, but lack financial interest in, their employer's non-U.S. ("foreign") financial accounts, or entities closely related to their employer.  (or closely related entities).