1. Foreign Accounts – Form 8938/ FinCEN 114

2. Discussion Outline: Definitions Penalties for Non-Compliance, FBAR
FBAR Extension
Tour of FBAR E-Filing
Penalties for Non-Compliance, 8938
Form 8938
When to use it
What belongs on this form
Comparison of Forms 8938 and FBAR
Examples
Questions and Answers

3. FBAR Definitions: Who Must File an FBAR.
A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
2. Financial Account.
A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund.
3. Foreign Financial Account.
A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account.

4. Definitions, continued:
4. Financial Interest.
A United States person has a financial interest in a foreign financial account for which:
1. the United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person; or
2. the owner of record or holder of legal title (see handout for more information)
5. Signature Authority.
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. See Exceptions, Signature Authority.
6. United States Person.
United States person means United States citizens (including minor children); United States residents; entities, including but not limited to, corporations, partnerships, or limited liability

5. Discrete BSA Filing
What is a discrete BSA filing? Discrete filings refer to BSA forms that are submitted one at a time rather than aggregated batches.
How does discrete BSA E-Filing differ from paper-based BSA filing? When filing discrete electronic forms via BSA E-Filing, you complete electronic forms on your computer (rather than creating hard copies by hand or using a typewriter or computer) and submit them electronically to BSA E-Filing (rather than mailing hard copies to the Enterprise Computing Center - Detriot). (Please see the related detailed instructions in the BSA E-Filing User Manual.) Unlike with paper forms, you do not have the ability to enter information outside of a form's allotted space. The content of a BSA E-Filing discrete filing must meet the BSA E-Filing Electronic Filing Requirements that exist for specific BSA forms. These electronic filing requirements are available on the FinCEN website.
What is a batch BSA Filing? A batch BSA filing is an electronic file created by a batch file creation software program (either developed in-house or bought from a third party vendor). The file typically contains multiple BSA forms (although it is possible for a batch to contain just one filing).

6. Penalties
A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation.
If there is reasonable cause for the failure and the balance in the account is properly reported*, no penalty will be imposed.
(*Reported at the time of filing the form)
A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. See 31 U.S.C. section 5321(a)(5). Willful violations may also be subject to criminal penalties under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. section 1001.

7. FBAR Extension From: FinCEN Notice 2015-1 FBAR Filing Requirement
Extended Filing Date Related to Notice
The due date for filing the FBAR, for certain individuals with signature authority over but no financial interest in one or more foreign financial accounts, specifically individuals whose FBAR filing requirements may be affected by the signature authority filing exceptions in 31 CFR § (f)(2)(i)-(v)
FinCEN received questions that required additional consideration with respect to the exceptions addressed in these Notices. FinCEN is considering regulatory changes to address such questions; therefore, FinCEN is further extending the filing due date to April 15, 2017, for individuals whose filing due date for reporting signature authority was previously extended by Notice
The FBAR is a calendar year report ending December 31 of the reportable year. Beginning with the 2016 tax year, the due date for FBAR reporting will be April 15 of the year following the December 31 report ending date as changed by section 2006(b)(11) of PL If requested, this change also provided for a six-month extension of time to file the form (for tax years beginning after 2015).

8. Internet Explorer is preferred
Internet Explorer is preferred

9. Enrolled Agents and CPA’s, etc must have account to file FBAR.
Do not start here.
Individuals May Use Two Methods:
Fillable PDF
Online Forms

10. Submit a completed FBAR Track status of submitted FBAR reports 4 1
Start a new FBAR
Submit a completed FBAR
Track status of submitted FBAR reports
Access step-by-step process guides 2 3

11. FBAR Report

12. “Third Party Preparer” info.
Use active tabs across the top of the page to navigate the form. Be sure to check box 44a if you are a preparer and fill in
“Third Party Preparer” info.

14. PENALTIES, FORM 8938
Failure-To-File Penalty If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), you may be subject to a penalty of $10,000.
Continuing failure to file.   If you do not file a correct and complete Form 8938 within 90 days after the IRS mails you a notice of the failure to file, you may be subject to an additional penalty of $10,000 for each 30-day period (or part of a period) during which you continue to fail to file Form 8938 after the 90-day period has expired. The maximum additional penalty for a continuing failure to file Form 8938 is $50,000.
Accuracy-Related Penalty If you underpay your tax as a result of a transaction involving an undisclosed specified foreign financial asset, you may have to pay a penalty equal to 40 percent of that underpayment.
Married taxpayers filing a joint income tax return.   If you are married and you and your spouse file a joint income tax return, the failure to file penalties apply as if you and your spouse were a single person. You and your spouse’s liability for all penalties is joint and several.

15. PENALTIES, continued…
Effect of foreign jurisdiction laws. The fact that a foreign jurisdiction would impose a civil or criminal penalty on you if you disclose the required information is not reasonable cause.
Fraud If you underpay your tax due to fraud, you must pay a penalty of 75 percent of the underpayment due to fraud.
Criminal Penalties In addition to the penalties already discussed, if you fail to file Form 8938, fail to report an asset, or have an underpayment of tax, you may be subject to criminal penalties.
Statute of Limitations If you fail to file Form 8938 or fail to report a specified foreign financial asset that you are required to report, the statute of limitations for the tax year may remain open for all or a part of your income tax return until 3 years after the date on which you file Form 8938.

16. When to use the Form 8938
From: Form 8938 Instructions and
Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010.  For most individual taxpayers, this means they will start filing Form 8938 with their 2011 income tax return to be filed this coming tax filing season
Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return.  Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below).
Specified domestic entity reporting.   For tax years beginning after December 31, 2015, certain domestic corporations, partnerships, and trusts that are considered formed or availed of for the purpose of holding, directly or indirectly, specified foreign financial assets (specified domestic entities) must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

17. If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold
If you are required to file Form 8938, you do not have to report financial accounts maintained by: *a U.S. payer (such as a U.S. domestic financial institution),  *the foreign branch of a U.S. financial institution, or  *the U.S. branch of a foreign financial institution.
Refer to Form 8938 instructions for more information on assets that do not have to be reported
6. You must file Form 8938 if:
You are a specified individual. 
A specified individual is:
A U.S. citizen
A resident alien of the United States for any part of the tax year (see Pub. 519 for more information)
A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return
A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Pub. 570 for definition of a bona fide resident)
AND…

18. 7. You have an interest in specified foreign financial assets required to be reported. 
A specified foreign financial asset is:
Any financial account maintained by a foreign financial institution, except as indicated above 
Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
Stock or securities issued by someone other than a U.S. person
Any interest in a foreign entity, and 
Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person.
Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset.
AND…

19. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you:
Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Taxpayers living abroad.  You are a taxpayer living abroad if:
You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year,
or You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.
If you are a taxpayer living abroad you must file if:
You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets.

20. Reporting specified foreign financial assets on other forms filed with the IRS.
If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938.  However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets. 
Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you.

21. WHAT BELONGS ON
FORM 8938
Specified Foreign Financial Assets. Specified foreign financial assets include the following assets. 1. Financial accounts maintained by a foreign financial institution. 2. The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution: a. Stock or securities issued by someone that is not a U.S. person (including stock or securities issued by a person organized under the laws of a U.S. possession), b. Any interest in a foreign entity, and c. Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person (including a financial contract issued by, or with a counterparty that is, a person organized under the laws of a U.S. possession).
Other specified foreign financial assets. Examples of other specified foreign financial assets include the following, if they are held for investment and not held in a financial account. Stock issued by a foreign corporation. A capital or profits interest in a foreign partnership. A note, bond, debenture, or other form of indebtedness issued by a foreign person. An interest in a foreign trust or foreign estate. An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty. An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer.

22. Assets held for investment
Assets held for investment. You hold an asset, including a partnership interest, for investment if you do not use it in, or hold it for use in, the conduct of any trade or business. Stock is not considered used or held for use in the conduct of a trade or business.
Interests in Specified Foreign Financial Assets. You have an interest in a specified foreign financial asset if any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the asset are or would be required to be reported, included, or otherwise reflected on your income tax return.
*Interests in assets held by disregarded entities. If you are the owner of a disregarded entity, you have an interest in any specified foreign financial assets owned by the disregarded entity.
Interests in assets generating certain unearned income of children. If you file Form 8814, Parents' Election To Report Child's Interest and Dividends, with your income tax return to elect to include in your gross income certain unearned income of your child (the “kiddie tax” election), you have an interest in any specified foreign financial asset held by the child.
Interests in assets held by entities that are not disregarded entities. In most cases, you do not own an interest in any specified foreign financial asset held by a partnership, corporation, trust, or estate solely as a result of your status as a partner, shareholder, or beneficiary

23. Interests in assets held by grantor trust
Interests in assets held by grantor trust. If you are considered the owner under the grantor trust rules of any part of a trust, you have an interest in any specified foreign financial asset held by that part of the trust you are considered to own.
Interests in foreign estates and foreign trusts. An interest in a foreign trust or a foreign estate is not a specified foreign financial asset unless you know or have reason to know based on readily accessible information of the interest. If you receive a distribution from the foreign trust or foreign estate, you are considered to know of the interest
Interests in foreign pension plans and foreign deferred compensation plans. Report in Part VI your interest in the foreign pension plan or foreign deferred compensation plan. Do not separately report the assets held by the plan.
Reporting Maximum Value. You must report the maximum value during the tax year of each specified foreign financial asset reported on Form In most cases, the value of a specified foreign financial asset is its fair market value. An appraisal by a third party is not necessary to estimate the maximum fair market value during the year.
Foreign currency conversion. If your specified foreign financial asset is denominated in a foreign currency during the tax year, the maximum value of the asset must be determined in the foreign currency and then converted to U.S. dollars. In most cases, you must use the rate on fsreports/rpt/treasRptRateExch/ treasRptRateExch_home.htm. If no U.S. Treasury Bureau of the Fiscal Service exchange rate is available, you must use another publicly available foreign currency exchange rate for purchasing U.S. dollars and disclose the rate on Form 8938.

24. Currency determination date
*Currency determination date. Use the currency exchange rate on the last day of the tax year to figure the maximum value. Use this rate even if you sold or otherwise disposed of the specified foreign financial asset before the last day of the tax year.
Exception for financial account statement currency conversion rate. You may rely on the foreign currency conversion rate reflected in a financial account statement issued at least annually by the financial institution maintaining the account.
Certain financial accounts. The following financial accounts and the assets held in such accounts are not specified foreign financial assets and do not have to be reported on Form A financial account that is maintained by a U.S. payer, such as a domestic financial institution. In general, a U.S. payer also includes a domestic branch of a foreign bank or foreign insurance company and a foreign branch or foreign subsidiary of a U.S. financial institution. Examples of financial accounts maintained by U.S. financial institutions include: U.S. mutual funds accounts; IRAs (traditional or Roth); Section 401(k) retirement accounts; Qualified U.S. retirement plans; Brokerage accounts maintained by U.S. financial institutions. 2. A financial account that is maintained by a dealer or trader in securities or commodities if all of the holdings in the account are subject to the mark-to-market accounting rules for dealers in securities or an election under section 475(e) or (f) is made for all of the holdings in the account.
Foreign social security. An interest in a social security, social insurance, or other similar program of a foreign government is not a specified foreign financial asset.

25. Examples for Form 8938:
Q. I am not married and do not live abroad. The total value of my specified foreign financial assets does not exceed $49,000 during the tax year.
A. You do not have to file Form You do not satisfy the reporting threshold of more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Q. I am not married and do not live abroad. I sold my only specified foreign financial asset on October 15, when its value was $125,000.
A. You have to file Form You satisfy the reporting threshold even though you do not hold any specified foreign financial assets on the last day of the tax year because you did own specified foreign financial assets of more than $75,000 at any time during the tax year.
Q. I am not married and do not live abroad. An unrelated U.S. resident and I jointly own a specified foreign financial asset valued at $60,000.
A. You each have to file Form You each satisfy the reporting threshold of more than $50,000 on the last day of the tax year.

26. More Examples:
Q. I am not married and do not live abroad. I own an entity disregarded for tax purposes, which owns one specified foreign financial asset valued at $30,000. In addition, I own a specified foreign financial asset valued at $25,000.
A. You have to file Form You own both the specified foreign financial asset owned by the disregarded entity and the specified foreign financial asset you own directly, for a total value of $55,000. You satisfy the reporting threshold of more than $50,000 on the last day of the tax year.
My spouse and I do not live abroad, file a joint income tax return, and jointly and individually own specified foreign financial assets. On the last day of the tax year, my spouse and I jointly own a specified foreign financial asset with a value of $90,000. My spouse has a separate interest in a specified foreign financial asset with a value of $10,000. I have a separate interest in a specified foreign financial asset with a value of $1,000.
You and your spouse have to file a combined Form You and your spouse have an interest in specified foreign financial assets in the amount of $101,000 on the last day of the tax year. This is the entire value of the specified foreign financial asset that you jointly own, $90,000, plus the value of the asset that your spouse separately owns, $10,000, plus the value of the asset that you separately own, $1,000. You and your spouse satisfy the reporting threshold of more than $100,000 on the last day of the tax year.

27. FBAR Examples:
Example: Kristin, a United States person, owns foreign financial accounts A, B and C with account balances of $3,000, $1,000 and $8,000, respectively. Kristin is required to report accounts A, B and C because the aggregate value of the accounts is over $10,000. It does not matter that no single account exceeded $10,000.
Example: Diane, a United States person, owns a foreign financial account with a maximum value of $15,000 but the account does not produce income. Diane is required to file an FBAR to report the account. Whether or not an account produces income does not affect the requirement to file an FBAR.
Example: A Florida corporation that owns 100 percent of a Spanish company that has foreign financial accounts has to file an FBAR because the corporation is a United States person and it directly owns more than 50 percent of the total value of the shares of stock of the Spanish company that is the owner of record or holder of legal title.

28. More FBAR Examples:
Example: A United States person who owns 75 percent of the Florida corporation in the previous example has to file an FBAR because he indirectly owns more than 50 percent of the total value of shares of stock of the foreign corporation that owns foreign financial accounts.
Example: Craig, a United States person, owns foreign financial accounts X, Y, and Z with maximum account values of $100, $12,000 and $3,000, respectively. Craig is required to file an FBAR because the aggregate value of the accounts is $15,100. Craig must report foreign financial accounts X, Y, and Z on the FBAR even though accounts X and Z have maximum account values below $10,000.