2024 FBAR Deadline: What US Expats Need to Know

Are you an expat navigating the complexities of living abroad? The FBAR deadline is a key date in managing overseas financial obligations.

Key Takeaways

• Deadline: The annual deadline for filing an FBAR is April 15, with an automatic extension to October 15.

• FBAR Filing Threshold: U.S. persons must file an FBAR if they have financial interests in or signature authority over foreign financial accounts exceeding $10,000 at any point during the calendar year.

• Penalties for Non-compliance: Failure to file an FBAR can result in severe penalties, including substantial fines.

Understanding FBAR: A Brief Overview

Before diving into the specifics, let's clarify what FBAR is. The FBAR, officially known as FinCEN Form 114, is a report submitted electronically to the Financial Crimes Enforcement Network (FinCEN), not the IRS, as commonly misconceived. It's designed to combat tax evasion by providing transparency into the foreign financial accounts held by US persons.

Who Needs to File?

Do you have a financial interest in or signature authority over one or more accounts outside the US, and do the total values of all foreign financial accounts exceed $10,000 at any time during the calendar year? If so, you're required to file an FBAR. This rule applies even if the account(s) only surpassed the $10,000 threshold for a moment.

The 2024 FBAR Deadline: Mark Your Calendars

For the 2023 tax year, the FBAR deadline aligns with the US tax filing date, April 15, 2024. However, there's an automatic extension until October 15, 2024, for those who need more time. Despite this extension, it's wise to prepare your FBAR well in advance to avoid last-minute stress.

Common Mistakes to Avoid

Filing an FBAR can seem like a straightforward task, yet it's fraught with potential pitfalls that can easily trip up even the most diligent taxpayers. Awareness and careful attention to detail can help you navigate around these common errors:

Underreporting Accounts

One of the most frequent mistakes is failing to report all eligible foreign financial accounts. It's not just the accounts with significant balances that matter; every account that had a balance exceeding $10,000 at any point during the calendar year must be reported. This includes:

• Temporary spikes in account balances, perhaps due to a transfer or a deposit, which might push the total over the threshold momentarily.

• Accounts that you might not immediately consider financial accounts, such as a foreign life insurance policy with a cash value or an investment account.

Incorrect Account Values

Another common error involves inaccurately reporting the maximum values of accounts. The FBAR requires the maximum value of each account during the calendar year, converted to US dollars. To ensure accuracy:

• Use the Treasury Reporting Rates of Exchange for the appropriate year for currency conversion. These rates are published annually by the US Treasury and provide standardized conversion rates for various foreign currencies.

• If the exact highest value isn't known, make a reasonable estimate that reflects the maximum value as closely as possible.

Overlooking Joint Accounts

Joint accounts often lead to confusion during the FBAR filing process. It's crucial to understand that:

• Each joint account holder is required to file an FBAR if the total value of all foreign financial accounts in which they have an interest exceeds the $10,000 threshold.

• This requirement applies even if the other joint account holder has already filed an FBAR reporting the same account.

Neglecting Signature Authority

Many individuals fail to report accounts over which they have signature authority but no financial interest. If you have the authority to control the disposition of assets in the account by direct communication with the institution, you must report the account on your FBAR. This often applies to:

• Employees with authority over a business's foreign financial accounts.

• Individuals with elderly parents who have been granted authority over their parents' foreign accounts.

Delaying Filing Until It's Too Late

Procrastination is a common issue that can lead to missed deadlines or rushed filings, increasing the likelihood of errors. The automatic extension to October 15 provides a safety net, but relying on this extension can be risky.

Penalties for Non-Compliance

Failing to file an FBAR can lead to severe consequences. Non-willful violations may result in a penalty of up to $12,921 per violation. Willful violations carry a much steeper penalty, up to the greater of $129,210 or 50% of the account balances. In extreme cases, criminal charges could also apply.

What Should You Do If You Missed the FBAR Deadline?

For Americans abroad who've just realized they've missed the FBAR filing deadline, there's a beacon of hope: the Delinquent FBAR Submission Procedures. This IRS-sanctioned pathway is designed for those who have inadvertently failed to report their foreign financial accounts and requires backfilling 6 years of FBARs . It's important to understand that this procedure is available only to individuals who haven't been contacted by the IRS about a late FBAR and who haven't willfully neglected their filing obligations. By taking advantage of this procedure, expats can come into compliance without facing the steep penalties typically associated with late or non-filing.

Need Help With Filing Your FBAR or U.S. Taxes From Abroad?

At CPAs for Expats, we specialize in helping US expats stay compliant with their US taxes. Our low fees and 4.9/5 rating on independent review platforms attests to our commitment to excellence and client satisfaction. Contact us today, and let our tax experts simplify your life and taxes.

Article by Lewis Grunfeld, CPA