This week we continue our review of some of the tax forms that corporations with international issues might need to file. Form 114—Report of Foreign Bank and Financial Accounts (FBAR) may be familiar to some as a possible filing requirement for individuals, but it also can be a filing requirement for corporations.
The FBAR reports the following information in regards to the financial accounts: bank name, bank address, account number, and maximum account value during the calendar year.
This form must be filed if the corporation 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 reported. Financial accounts include bank accounts, brokerage accounts, mutual funds, and trusts.
A corporation with a foreign financial account may have a reporting obligation even when the account does not produce any taxable income.
As with Form 5472 discussed in our last blog article, the penalties for not filing can be severe, even more so if you willingly fail to file an FBAR. Those required to file an FBAR who fail to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of violation.
Beginning in 2017 for tax year 2016, the FBAR due date has changed to April 15. Previously, FBARs were due on June 30 with no extensions. They will now be due with the individual and new corporate deadline on April 15, with allowance for a six-month extension to October 15.
It is important to file an FBAR timely and completely. Due to the complexity and severity of the penalties for not filing, it is important you consult your tax advisor to determine if you have a filing requirement.