FBAR (Foreign Bank Account Report)
AARO has always supported tax compliance and elimination of tax fraud. It therefore recognizes the need for financial reporting.
But as a 2019 GAO report (Foreign Asset Reporting, Actions Needed to Enhance Compliance Efforts, Eliminate Overlapping Requirements and Mitigate Burdens on US Persons Abroad [GAO-19-180], April 2019) made clear, current requirements are poorly targeted and probably ineffective.
Notably, reports on foreign financial accounts are required on three separate administrative forms: Form 8938 (filed by account holders) and Form 8966 (filed by foreign financial institutions), both required by FATCA, and FinCen 114 (“FBARs), required by the Bank Secrecy Act. Awareness of these reporting obligations is often poor, especially as regards FBARs since the filing threshold is low and they are filed separately from tax returns.
This can easily lead to non-compliance, often inadvertent, which in turn exposes holders of foreign financial accounts to very large FBAR-related fines.
AARO has recommended that financial reporting requirements for Americans resident overseas be consolidated and drastically simplified (see position paper on Financial Reporting Requirements) and that the disproportionate penalties for violations be eliminated.
The natural way to do this is to replace the existing reporting regime with the Common Reporting Standard (eliminating the FBAR), since this is already widely used internationally. Accounts located in overseas Americans’ countries of residence should not be considered as “foreign” accounts and should be exempted from all reporting.
AARO Special Report: “The Foreign Bank Account Report (FBAR)”
What it is (and why no American expat can afford not to know about it)
Not enough American expats know what an FBAR is, let alone that they may need to file them.
For this reason, AARO – working with London-based American journalist Helen Burggraf – has prepared this four-part Special Report on FBARs, aka “Foreign Bank Account Reports”.
We urge those who are not familiar with FBARs to at least read the beginning of this first article, because you do not have to be rich to find that you have fallen foul of the FBAR regs (and since FBARs are not a tax form, they are often not prepared, or even mentioned, by U.S. tax preparers).
This Special Report from March 1, 2022 on FBARs consists of:
- The main story, “The Foreign Bank Account Report (FinCEN Form 114) at 51”.
- A list of suggestions experts have said could improve the FBAR implementation, “Ways Experts Say FBAR Could be Improved” .
- How we got here from the 1970 Bank Secrecy Act, “How We Got Here: an FBAR Timeline”.
- Finally, some data showing (to the extent that we were able to ascertain, given how little has officially been published) how many people file FBARs, “FBAR Filing Data by Year”.
We would like to add here that Helen was given considerable support in producing this material by Jack Townsend, a Charlottesville, Virginia-based offshore tax (and FBAR) expert, for which we would like to express our heartfelt thanks.