Keep up with FBAR filing rules
Staying abreast of changes in reporting requirements on foreign accounts has been a significant agenda item for anyone who works in the banking field. The signature authority rules have even resulted in overlapping requirements.
Proposed regulations would clarify some of the rules for filing Reports of Foreign Bank and Financial Accounts (FBARs). The Financial Crimes Enforcement Network (FinCEN) would expand filing requirements by eliminating the 25-or-more rule, but simplify the rules for some employees with signature authority over accounts.
Worldwide income
U.S. persons (broadly defined as U.S. citizens and green card holders) need to disclose all their income from foreign bank and security accounts as well as foreign trusts. This goes on Form 1040 Schedule B, Interest and Ordinary Dividends. Depending on the value of the account, a taxpayer may need to file several other forms.
Form 8938 may be necessary depending on the aggregate value of foreign financial assets. The thresholds vary based on filing status.
Then there is the FBAR now known as FinCEN Form 114. This is not a tax form. It is filed directly with a Treasury department if a foreign financial account had a balance of $10,000 or more at any time in the previous year. It is important to note the FBAR reporting deadline has moved to April 15.
Employees with signature authority
Some officers and employees have overlapping signature authority (although no financial interest) in foreign financial accounts owned by a parent entity and its controlled subsidiary. The proposed regs would eliminate the need for employees to report these accounts if the employer already reports them.
Elimination of 25-or-more rule
Currently, separate FBARs are not required when a U.S. person has a financial interest (including signature authority) over 25 or more foreign accounts. The proposed regulations eliminate this so called “25-or-more rule.” This change is designed to provide FinCEN with more detailed foreign account information.
Does your diversified investment portfolio include foreign accounts? Do you have signature authority over foreign accounts through your job? Learn more about current FBAR filing requirements by speaking with an attorney well versed in this complicated area of the law.