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International Taxation


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The FBAR –Deadline Approaching



The deadline for filing the 2015 Report of Foreign Bank and Financial Accounts (FinCEN Form 114) (the FBAR) is quickly approaching. Since it was first introduced in the 1970s, each year's FBAR has been due on or before June 30th of the following year, with no extension available. The IRS now requires that all FBARs be electronically filed. 

On July 31, 2015, President Obama signed into law the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41. The Act changed the deadlines for various tax filings, including the FBAR. For tax years beginning after December 31, 2015, the FBAR will follow the due date of the U.S. Individual Income Tax Return and be due April 15 for U.S. residents and June 15 for non-U.S. residents. Both deadlines can be automatically extended to October 15. It is anticipated that the IRS will create a form for requesting an automatic extension of time to file the FBAR or modify the current Individual extension (Form 4868) to incorporate the FBAR.

United States persons are required to file an FBAR if:

  • The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  • The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.

Exceptions to FBAR filing requirements include:

  • Certain foreign financial accounts jointly owned by spouses;
  • United States persons included in a consolidated FBAR;
  • Correspondence/Nostro accounts;
  • Foreign financial accounts owned by a governmental entity;
  • Foreign financial accounts owned by an international financial institution;
  • Owners and beneficiaries of U.S. IRAs;
  • Participants in and beneficiaries of tax-qualified retirement plans;
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
  • Trust beneficiaries, if a U.S. person reports the account on an FBAR filed on behalf of the trust; and
  • Foreign financial accounts maintained with a United States military banking facility.

United States persons include U.S. citizens; U.S. residents; corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938 (Statement of Specified Foreign Financial Assets), which is filed with an income tax return. Form 8938 is in addition to the FBAR filing requirement. If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign assets is more than the reporting threshold.  

Schedule B of Form 1040 (Interest and Ordinary Dividends) asks, "At any time during the tax year did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?" If the taxpayer answers "yes" to that question, the following question asks, "Are you required to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), to report that financial interest or signature authority?" The purpose of these questions are to make taxpayers aware of their responsibility to file an FBAR whenever the total of their foreign accounts exceed $10,000 at any time during the tax year.

Taxpayers who are required to file an FBAR and fail to do so may be subject to civil penalties. For non-willful FBAR violations, a penalty, not to exceed $10,000 per violation, may be imposed. A penalty most likely will not be imposed if the violation was due to reasonable cause and the taxpayer files the delinquent FBAR. IRS examiners have discretion in determining the penalty amount and may determine if a lesser penalty amount is appropriate. Willfully neglecting to file an FBAR may subject a taxpayer to a civil penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation.

The IRS issued interim guidance to its auditors on May 13, 2015, regarding the imposition of the FBAR penalty. The interim guidance stated that in most willful violation cases, the total penalty for all years under consideration will not exceed 50 percent of the highest aggregate balance for all unreported foreign accounts during the years under examination. For taxpayers who had not willfully neglected to disclose foreign accounts and income, the penalty will generally not exceed $10,000 per year. This guidance expired May 13, 2016; however, it provided procedures to ensure consistency and efficiency in administration of the FBAR compliance program.




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