Big Fat Disclaimer: I am not a tax expert or an accountant. Be sure to research and confirm all information listed above. It is your responsibility that your taxes are filled out correctly.
Taxes for Expats has agreed to give Sydney Moving Guide readers a $75USD credit (promo code “downunder”) towards any of their services. This credit will cover your FBAR filing, something I talk about in this post that is a very important form you will be filing each year as a US expat.
Please use this credit! Yes, Taxes for Expats is a partner of Sydney Moving Guide, and yes, they do pay me a referral commission. The $75 credit comes from me waving a portion of that commission because getting your taxes right is of huge importance. Even what seem to be minor mistakes, can result in major fines.
Form FinCEN 114 aka Foreign Bank Account Report (FBAR)
Form FinCEN 114, or a Foreign Bank Accounts Report (FBAR), is due by April 15th. You must file your FBAR online with the Financial Crimes Enforcement Network (FinCEN) here. You do not file it with the IRS though you will need to fill out a Schedule B (1040) form when you file your taxes.
FBAR is a massive source of confusion for almost every US expat living overseas, or any US citizen or green card holder with foreign financial accounts such as savings, checking or superannuation.
I am going to cover a few key points, then list resources so that you can do some more research.
Key Points to Know About FBAR
- If you have an aggravated value of $10,000USD or more in foreign financial accounts at ANY point during the year, you are required to file FBAR. These accounts include savings, checking, superannuations plus others. We’ll get into this more below.
- Non-willful, meaning unintentional, FBAR penalties can be as high as $12,459USD per account, per year, going back as far as six years. Yeah, that’s a flippin’ massive penalty, and it’s the non-willful one. Ready for the willful violation?
- Willful FBAR penalties may be the greater of $124,588USD or 50 percent of the balance in the account at the time of the violation, for each violation.
After reading what the FBAR penalties are, questions start pouring in.
I will answer a few questions that I have gotten from SMG readers in the past below then list all the links I promised you for future reading.
Please Note: There is another form you need to know about that is for reporting your superannuation if it is a specific value or above which means you will be reporting it twice.
FBAR Questions from Sydney Moving Guide Readers
Q: I didn’t realize the due date for FBAR was April 15th and thought it was June 15th when my tax filing due date is. Can I ask for an extension?
A: An extension is not required because FinCEN grants filers that failed to meet the FBAR due date of April 15th an automatic extension to October 15th each year. The caveat here is that this can change depending on any changes in the tax laws. For now, you should be good just get it in by October 15th. And remember, it is not filed with the IRS.
A: Yes. Financial accounts you need to report are savings, checking, time deposit, securities, brokerage, an insurance policy with a cash value, shares in a mutual fund and other financial accounts. Please consult a tax professional with questions about what financial accounts need to be reported on the FBAR.
Remember, it’s the aggregate value of all your foreign financial accounts at any time during the year. So sum of all qualifying accounts if that sum was at any time $10,000USD or more.
Q: When we moved to Australia, we transferred $15,000USD to our savings account then a week later transferred $6,000AUD from that account to our checking account to cover our rental deposit? Do we still have to file an FBAR?
A: Yes. You must file an FBAR if at ANY point during the year, the aggregate value of your financial accounts in Australia were $10,000USD or more.
Q: So we only need to report the $15,000USD we transferred when we opened our savings account?
A: Good question. The amount you report for FBAR is the maximum value of that account during the year. In this case, it would be $15,000USD.
IMPORTANT: You will also need to report the maximum value of your checking account since you transferred money to that account and the aggregated value of the two accounts at any time of the year was $10,000USD or more.
Q: Wait a second. Isn’t that counting that $6,000AUD twice?
A: FBAR is not a tax; it’s a report of your foreign financial accounts. The US Department of Treasury wants to know what foreign financial accounts are in your name and the highest value of those accounts during the year. Again, you are not filing your FBAR with the IRS.
Q: That’s $10,000USD not $10,000AUD, right?
A: Yes, when you file your FBAR it is in USD.
Now to calculate the USD value of your financial accounts for FBAR, use the Treasury Reporting Rates of Exchange listed on the Bureau of the Fiscal Service website. Be sure to bookmark this in your web browser since you will need to reference it each year.
Q: I own property in Australia. Do I need to report the real estate value on my FBAR?
A: No, you do not need to report it on your FBAR because it is not a foreign financial account, but you may be required to file Form 8938 for foreign assets depending on the value.
Q: This sounds like a complete nightmare. What do I have to pay to have someone sort this out for me?
A: There are many US expat tax consultants that can help you, for a fee of course. In fact, it is recommended to have a professional handle this for you because of how confusing it all is. I haven’t even come close to covering everything like self-employment, joint filing FBAR, filing an FBAR for your children and FBAR for business owners or those who have signatory authority for foreign financial accounts.
Since making a mistake on your FBAR report comes with such high penalties (remember the non-willful penalty I mentioned earlier) you need to consider if it is worth your time to sort this out or is it worth the peace of mind to have someone handle it for you.
To give you some idea, the instructions for FBAR is 22 pages long, and the IRS estimates it will take about 2.5 hours to fill out.
But wait, there’s another form you need to know about for reporting foreign financial assets that goes hand in hand with FBAR.