The Bank Secrecy Act may require you to file a FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR), even if you are not a U.S. Citizen. The FBAR must be filed annually by all “United States Persons”, which includes U.S. citizens, U.S. residents, and certain entities. The FBAR must be filed if your total interest in foreign accounts exceeds $10,000 at any point during the calendar year.
FBAR Filing Requirements for Non-Citizens
The IRS has its own rules for determining if you are a resident for tax purposes. If you meet either the green card test or the substantial presence test, the IRS considers you a resident, and you must comply with all tax filing requirements, including filing an FBAR.
To satisfy the green card test, you must be a lawful permanent resident of the United States at any time during the calendar year. You generally meet this test if the U.S. Citizenship and Immigration Services (USCIS) has issued you an alien registration card, known as a green card.
The substantial presence test is met if you are physically present in the United States for at least 31 days during the current calendar year, and for at least 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
In other words, if you were present for 183 days during the current year, you meet the substantial presence test and are a U.S. resident for tax purposes. There are exceptions to this rule in some cases. For example, teachers, students, and professional athletes may be considered exempt, and will not have to count the days they are physically present.
Penalties for FBAR Violations
The penalties for failing to file an FBAR are very severe. Even for non-willful violations, the penalty can be $10,000 per year for each account. If your failure to file an FBAR is considered willful you can be liable for civil penalties equal to the greater of $100,000, or 50% of the account balance. The most egregious offshore bank account problems, can result in criminal tax charges and fines of up to $250,000 and five years in jail.
If you failed to file an FBAR and want to bring yourself into compliance, there are several options available to you, including quiet disclosure, “noisy” disclosure under the Offshore Voluntary Disclosure Program, and using the Streamlined Filing Procedures. Talk to a tax attorney about which option will best protect you from potentially ruinous civil and criminal tax penalties.