If you are a U.S. person with a financial interest in or signature authority over a foreign financial account (or accounts) with aggregate value of more than $10,000 at any time during the calendar year, you have to file an FBAR or Report of Foreign Bank and Financial Accounts on or before June 30, 2014. There is a lot to consider in that one statement. Who is a U.S. person? What constitutes a financial interest? What makes up the “aggregate value?”
Who is a U.S. Person?
Green Card Test
For the green card test, if you have a green card then you are a U.S. person regardless of your location or how much time you spent in the U.S.
Substantial Presence Test
For the substantial presence test, you must be physically present in the United States on at least 31 days during the current year, and 183 days during the 3-year period that includes the current year and the 2 years immediately before that. The 183 days is calculated by counting all the days you were present in the current year plus 1/3 of the days you were present in the first year before the current year plus 1/6 of the days you were present in the second year before the current year.
First Year Election
If you are a part year resident making a first year election, then you should only consider accounts that you had during the election period.
What is a Financial Interest or Signature Authority?
A U.S. Person must have either a financial interest or signature authority over a foreign financial account for the FBAR filing requirements to apply.
Financial interest means that the U.S. person holds title to the financial account. In other words, they are the owner of record.
Signature authority means the authority of an individual human being, individually or jointly, to tell the bank or other financial institution what to do with the assets. These directions can be in writing or otherwise. Supervisors who can only approve the disposition of assets in the accounts but cannot control the disposition of the assets alone are not included by the definition of signature authority.
What is a Financial Account?
A financial account for FBAR purposes is an account that contains cash or reportable non-cash assets. A financial account includes accounts like a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). It also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
Account means there is an established relationship with a financial institution, or a person acting as a financial institution, that constitutes an account relationship. That is why stock held in a brokerage account is reportable, but shares of public stock held directly by a U.S. person are not reportable. The directly held shares are not maintained in an account with a financial institution.
Bitcoin and Other Virtual Currencies
Accounts containing virtual currencies like Bitcoin – those currencies that can be converted into U.S. dollars or other legal tender – are currently not reportable on the FBAR. But FinCEN, the agency responsible for the FBAR, is watching the developments closely. There is still a great deal of uncertainty with FinCEN and the IRS’s approach to virtual currency. For example, if you keep your Bitcoin in a relatively static account like a Bitcoin wallet, it may not be reportable. However, an account at a virtual currency exchange may well be reportable.
Assets in Retirement Accounts
What if your individual retirement account holds assets in a foreign financial institution? Must you report those accounts? According to the regulations, if your IRA is a qualified U.S. account formed in compliance with the U.S. Tax Code, you do not have to report those accounts.
How Do You File?
If you are a U.S. person with a financial interest in or signature authority over a foreign financial account (or accounts) with aggregate value of more than $10,000 at any time during 2013 or the part of the year that you filed a first year election, go to bsaefiling.fincen.treas.gov and use the BSA E-Filing system to file Form 114 before June 30, 2014. If you have filed an FBAR previously, you will notice that this has changed from previous years. In September 2013, the new FinCEN Form 114 superseded the Treasury Department Form 90-22.1. Form 114 is available in electronic form only.