FinCEN Form 114 trust filers constitute a highly problematic category of FBAR filers. Form 114 trust filers are problematic not so much because the FBAR requirement itself is unclear, but, rather, because the trustees do not realize that this requirement applies to them. In this article, I would like to educate potential Form 114 trust filers about the FBAR requirement and when it applies to them.
Form 114 Trust Filers: FBAR Background Information
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114, commonly known as FBAR, was created in the 1970s as a result of the Bank Secrecy Act of 1970. Originally designed to fight financial crimes and terrorism, FBAR turned into a formidable weapon for the IRS after 2001 to fight US international tax noncompliance.
The biggest reason why FBAR became such a useful tool to fight US international tax compliance are the draconian penalties associated with FBAR noncompliance. FBAR has a full range of penalties from criminal (i.e. a person actually going to jail for FBAR noncompliance) to non-willful (which may apply in situations when a person did not even know that FBAR existed).
A US person must file FBAR if he has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of these foreign financial accounts exceeds $10,000 at any time during the calendar year. Prior to 2016 FBAR, the FBAR deadline was June 30 of each year. Starting 2016 FBAR, the FBAR deadline is aligned with the tax return deadline, including automatic extension to October 15 (this is still true as of the tax year 2019). This may change in the future years.
FinCEN Form 114 Trust Filers: Trusts Must File FBARs
All US persons who meet the FBAR filing requirements must file the form by the required deadline. The term “US persons” includes not just individuals and businesses, but also estates and trusts. A trustee’s failure to timely file an accurate FBAR may result in the imposition of FBAR penalties on the trust.
All types of trusts (as long as they are US persons) must file FBARs, including non-grantor trusts and grantor trusts. It is important to emphasize that the fact that all trust income passes to the grantor or another owner of the trust does not absolve the trust from its obligation to file FBARs.
Contact Sherayzen Law Office for Professional Help With FinCEN Form 114 Trust Filings and Trust Offshore Voluntary Disclosures
Hence, if you are a trustee of a trust which has not complied with its FinCEN Form 114 obligations, then you should contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers, including trusts, to resolve their prior FinCEN Form 114 noncompliance. We can help you!