Mike Bosma: Remember – don’t overlook foreign filings (Voices)

Every year, under the law known as the Bank Secrecy Act, you must report certain foreign financial accounts — such as bank accounts, brokerage accounts and mutual funds — to the Treasury Department and keep certain records of those accounts.

You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.

Allegedly, the government wants you to report your foreign accounts, even if they don’t have income, or even if they do have income and you report it.

Who must file?

A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

1. a financial interest in, or signature or other authority over, at least one financial account located outside the United States if …

2. … the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.Generally, an account at a financial institution located outside the United States is a foreign financial account. Whether the account produced taxable income has no effect on whether the account is a “foreign financial account” for FBAR purposes.

What must I file?

You don’t need to report foreign financial accounts that are:

• Correspondent/Nostro accounts,
• Owned by a governmental entity,
• Owned by an international financial institution,
• Maintained on a United States military banking facility,
• Held in an individual retirement account (IRA) you own or are beneficiary of,
• Held in a retirement plan of which you’re a participant or beneficiary; or
• Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts.

Also, you don’t need to file an FBAR for the calendar year if:

• All your foreign financial accounts are reported on a consolidated FBAR.
• All your foreign financial accounts are jointly-owned with your spouse — and, if you completed and signed FinCEN Form 114a authorizing your spouse to file on your behalf, and your spouse reports the jointly-owned accounts on a timely-filed, signed FBAR.

When to file?

The FBAR is an annual report, due April 15 following the calendar year reported. You’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.

The maximum penalty for unwilful failure to file is $12,921. Yes, you read it correctly — failure to report $10,000 of foreign accounts could result in $12,921 in penalty. What’s more, willful failure to file results in a 50% penalty, up to $129,210. Yikes!

Other June filing due dates:

June 10, 2021

• Deadline for employees who earned more than $20 in tip income in May 2021 to report this income to their employers.

June 15, 2021

• Second Quarter Estimated Payment for Individuals.
• Second Quarter Corporate Estimated Tax Payment (must be filed electronically via EFTPS).
• Deadline for U.S. citizens living abroad to file individual tax returns or file Form 4868 for an automatic two-month extension.

June 30, 2021

• May NV Sales Use Tax Report
• Property Tax Cap Claim Form (to declare your primary residence and property tax increases are limited to 3% (versus 8%)). Note that if this property is a vacation home that is not rented or leased out at any time during the year and is the only residential property you own in Nevada, it qualifies for the lower property tax cap.

As always, this is a general discussion. Discuss your specific situation with a qualified CPA.

Michael D. Bosma, CPA, is Principal-in-Charge of Keystone CPAs. His monthly NNBW column, “Covering Your Assets,” focuses on effective planning strategies for every business owner. Reach him for comment at mbosma@keystone.cpa.