Kutchins, Robbins & Diamond, Ltd. Certified Public Accountants and Advisors

Foreign Bank & Financial Accounts

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury
by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).

Who Must File

United States persons are required to file an FBAR if:
1) 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

2) The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, 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

Exceptions to the Reporting Requirement

There are filing exceptions for the following United States persons or foreign financial accounts:
• Certain foreign financial accounts jointly owned by spouses.
• United States persons included in a consolidated FBAR.
• Correspondent/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 (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust).
• Foreign financial accounts maintained on a United States military banking facility.

Reporting and Filing Information

If you hold a foreign financial account you may have a reporting obligation even when the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and is due April 15 of the year following the calendar year being reported with a 6-month extension available. FinCEN will grant filers failing to meet the FBAR due date of April 15 an automatic extension to October 15 each year. A specific extension request is not required.

The FBAR must be filed electronically through FinCEN’s BSA E-Filing System. The FBAR is not filed with a federal income tax return.

The IRS can waive the penalty for failure to timely file or request an extension for any person required to file an FBAR for the first time. If you are required to file an FBAR and fail to properly file a complete and correct FBAR you may be subject to a civil penalty not to exceed $10,000 per violation for any non-willful violation that is not due to reasonable cause. For a willful violation, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.

Additional information about the FBAR can be found on the IRS website.

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

If you have specified foreign financial assets that exceed certain thresholds you must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. These foreign financial assets could include foreign accounts reported on an FBAR. The Form 8938 filing requirement
is in addition to the FBAR filing requirement.

Form 8938 must be filed by specified individuals who include U.S. citizens, resident aliens, and certain nonresident aliens if reporting thresholds are met.

Specified individuals living in the U.S. must file if:
• Unmarried (or Married Filing Separately) with total foreign financial assets valued at more than $50,000
on the last day of the tax year, or more than $75,000 at any time during the year, or
• Married Filing Jointly with total foreign financial assets valued at more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the
year.
Specified individuals living outside the U.S. must file if:
• Unmarried (or Married Filing Separately) with total foreign financial assets valued at more than $200,000
on the last day of the tax year, or more than $300,000 at any time during the year, or
• Married Filing Jointly with total foreign financial assets valued at more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the
year.

Delinquent FBAR Submission Procedures

If you have not filed a required FBAR and are not under a civil examination or a criminal investigation by the IRS, and have not already been contacted by the
IRS about a delinquent FBAR, you should file any delinquent FBARs and include a statement explaining why the filing is late. Select a reason for filing late on
the cover page of the electronic form or enter a customized explanation using the ‘Other’ option. If unable to file electronically you may contact FinCEN’s Regulatory
Helpline at 800-949-2732 or 703-905-3975 (if calling from
outside the United States) to determine acceptable alternatives to electronic filing.

The IRS will not impose a penalty for the failure to file the delinquent FBARs if income from the foreign financial accounts reported on the delinquent FBARs is properly reported and taxes are paid on your U.S. tax return, and you have not previously been contacted regarding an income tax examination or a request for delinquent
returns for the years for which the delinquent FBARs are submitted.

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