Any United States person with a financial interest in or signature authority over a foreign financial account, where the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, must file a Foreign Bank Account Report (FBAR). These terms can be difficult to apply in some situations, and can lead to FBAR compliance issues for those that are unaware that they have a filing requirement.
“Financial Interest” in a Foreign Account
If you are the owner of record for a foreign account, you have a financial interest, even though the account is maintained for the benefit of another person. Spouses are not required to file separate FBARs if all the foreign accounts that the non-filing spouse is required to report are owned jointly with the filing spouse, and filing spouse files an FBAR for all of the accounts, along with an Authorization to Electronically File FBARs.
Other situations where a person is considered to have a financial interest in an account include:
- a corporation in which the U.S. person owns more than 50% of the voting power or total shares
- a partnership in which the U.S. person owns more than 50% of the profits or capital
- any other entity in which the U.S. person owns more than 50% of the voting power, total equity, or share in profits
- a trust of which the United States person is the trust grantor and has an ownership interest in the trust for United States federal tax purposes
- a trust in which the United States person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year
“Signature Authority” in a Foreign Account
The general requirement is that those who can control the disposition of funds in the account have signature authority, and must file FBARs. However, there are several exceptions where a person with signature authority, but no financial interest in an account, does not need to file an FBAR.
Officers and employees of banks, financial institutions, and authorized service providers that are registered with the Securities and Exchange Commission or certain other regulatory agencies are not required to file FBARs for these accounts. Those who may be, but turn out not to be covered by this definition are personally liable for delinquent FBARs and the associated FBAR penalties, so it is a good idea to consult with a tax attorney to make sure that an exception applies.