Many taxpayers working abroad become enraged over the requirement to file FBARs, especially when they have many accounts (many of which might be dormant) or have mere “signature authority” over an employer’s accounts. They feel overwhelmed at the enormity of the FBAR filing task when numerous accounts are involved in such situations. They come to me foaming at the mouth and babbling about the unfairness of it all! I calmly tell them to read the instructions. Here they are.
We all know how onerous the filing task can be, but it is possible that the FBAR instructions may be somewhat helpful in some of these situations (maybe not a cure, but certainly a help).
An FBAR reporting duty will arise if a US person has a “financial interest” in, or signature over foreign accounts with an aggregate value of over $10,000 in the calendar year.
Having a “Financial Interest” in accounts means, for example, that you have legal title to the account either alone or with others; or it is a company account and you own over 50% of the company. See page 5 of the FBAR instructions for the definition of “financial interest” as it is broad and covers many different types of situations.
According to the FBAR instructions, signature authority is “the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account.” Conceivably this means a US person with internet authorization of a transaction through the use of passwords also has a “signature authority” for FBAR purposes.
“Financial Interest” in Numerous Accounts
Sometimes, a filer has a “financial interest” in 25 or more foreign financial accounts. This type of case can arise when individuals move around for employment, live in many countries, and fail to close their accounts; or when they maintain numerous investment and bank accounts, perhaps in different currencies. A simplified method is available for FBAR reporting in such cases. See page 15; Part I Item 14 of the FBAR instructions. The filer needs to simply check the ‘yes’ box, and enter the total number of accounts in Line 14a. He need not complete Parts II (re Separate Accounts) or Part III (Joint Accounts) of the FBAR, but must maintain records of the information. So, for example if you own over 50% of a foreign corporation (and therefore are deemed to have a “financial interest” in the accounts owned by the corporation) and the corporation has 40 bank accounts, you should check the box and state on 14a that there are 40 accounts. You need not fill out details re the banks, and amounts in the accounts.
Signature Authority Over Numerous Accounts or Over Foreign Employer’s Accounts
In certain cases, individuals with only signature authority over an account may escape many of the informational technicalities that would otherwise be required on the FBAR form. The basic idea behind the FBAR instructions for those with signature authority but no financial interest in an account is that such individuals often do not have access to the account statements and therefore cannot be expected to provide the highest account balance and other information. If you follow the FinCen Form 114 you will see that if your case fits within the below, then you need not provide the maximum balance, name of the financial institution, type of account, account number etc.
“Part IV — Information on financial account(s) where filer has signature authority but no financial interest in the account(s)
Part IV records information on foreign financial accounts where a filer with signature authority over the accounts but has no financial interest in the accounts. Filers with signature authority over 25 or more foreign financial accounts must complete only Items 34-43 for each person on whose behalf the filer has signature authority. In addition, United States person who (1) resides outside of the United States, (2) is an officer or employee of an employer who is physically located outside of the United States, and (3) has signature authority over a foreign financial account that is owned or maintained by the individual’s employer should only complete Part I and Items 34-43 of Part IV. Part IV should only be completed one time with information about the individual’s employer….”
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