Foreign financial accounts held by U.S. persons must be reported on the Report of Foreign Bank and Financial Accounts (FBAR), officially FinCEN Form 114, if the aggregate value of all such accounts exceeded $10,000 at any time during the calendar year. This filing is done electronically through the BSA E‑Filing System, not with your federal income tax return.
A U.S. person includes U.S. citizens and residents (including resident aliens), and domestic entities such as corporations, partnerships, trusts, and estates
Reporting Requirements for Trust Beneficiaries
A trust beneficiary with a financial interest in a foreign account is not required to file a separate FBAR for those accounts if the trust, trustee, or agent of the trust is a U.S. person and files an FBAR reporting the trust’s foreign accounts.
This exception applies when a beneficiary has an indirect financial interest and the trust files on behalf of all trust accounts.
Exemptions for Certain Accounts
FBAR reporting is not required for the following foreign financial accounts:
- IRA accounts: An owner or beneficiary of a U.S. individual retirement account (IRA) does not report foreign accounts held within the IRA.
- Qualified retirement plans: Participants or beneficiaries of U.S. tax‑qualified retirement plans (e.g., 401(a), 403(a), 403(b)) need not report foreign accounts held by or on behalf of the plan.
- Governmental entities: Foreign financial accounts owned by a U.S. governmental entity (including state universities/colleges that are agencies) are exempt.
- International financial institutions: Accounts of international financial institutions where the U.S. government is a member are exempt.
- Correspondent/Nostro accounts: Bank‑to‑bank settlement accounts are exempt.
- Certain joint filers: A spouse may not file a separate FBAR if all reportable accounts are jointly owned and the other spouse files correctly with a signed FinCEN Form 114a authorizing the joint filing.
Signature Authority vs. Financial Interest
- A person with signature authority over a foreign account but no financial interest generally must file an FBAR. However, exemptions may apply for:
- Officers or employees of U.S. banks examined by federal regulators (e.g., FDIC, OCC, Federal Reserve) who have signature authority but no financial interest in the accounts owned by the institution.
- Officers or employees of certain financial institutions (e.g., SEC‑ or CFTC‑registered firms) with authority over institutional accounts but no personal financial interest.
Recordkeeping Requirements
- Filers must retain records for at least five years from the FBAR due date. These records should include:
- Account owner’s name
- Account number
- Financial institution’s name and address
- The maximum value of the account during the year (in U.S. dollars)
- These records support accurate reporting and verification in case FinCEN or IRS questions a filing
Source:
FBAR Line Item Filing
Disclaimer: This information is based on general guidance from FinCEN Form 114 instructions. Always verify requirements with current IRS and FinCEN forms and instructions. For complex situations, consult a tax professional or attorney.