Report of Foreign Bank and Financial Accounts FINCEN Form 114

FinCEN Form 114 Business Filers | FBAR Lawyer & Attorney Delaware

In a previous article, I described individuals who need to file FinCEN Form 114. This essay is a continuation of the same series of articles concerning FinCEN Form 114 filers. Today, I will devote my attention to FinCEN Form 114 Business Filers.

FinCEN Form 114 Business Filers: FBAR Filing Requirement

We first need to understand what Form 114 is. The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 also known as “FBAR”, is one of the most important information returns administered by the IRS since 2001 (the form itself has existed since 1970). FBAR requires a US person to disclose his financial interest in or signatory authority (or any other authority) over foreign bank and financial accounts as long as the highest balance of these accounts, in the aggregate, exceeds $10,000 at any point during a calendar year.

FBAR is the creation of the Bank Secrecy Act, Title 31 of the United States Code (“USC”). In other words, it is technically not a tax form. In fact, its original purpose was to fight financial crimes.

Due to this legal history, FBAR has a ruthless yet highly elaborate penalty system. FBAR penalties range from criminal penalties that include incarceration to the astonishingly high willful and even non-willful civil penalties. This severe penalty system makes FBAR one of the most dangerous US international information returns.

FinCEN Form 114 Business Filers: General Definition

As described above, only US persons are required to file FBARs. There are various categories of US persons: individuals, businesses, trusts and estates. Our focus today is on business filers.

The general rule is that a business entity is considered a US person if it was created or organized in the United States or under the laws of the United States. There are two terms that we need to understand within this general rule in order to the rule apply correctly: entity and the United States.

FinCEN Form 114 Business Filers: Entity

For FBAR purposes, the word “entity” is defined broadly to include without limitation a corporation, a partnership and a limited liability company. This term applies even if a business is a disregarded entity for US tax purposes.

In other words, a single member limited liability company is required to file an FBAR if it has foreign accounts that satisfy the FBAR filing threshold. Again, the reason for applying the legal, rather than a tax a definition of “entity”, is driven by the FBAR’s legal history; it is a Title 31 requirement, not a Title 26 (i.e. the Internal Revenue Code) requirement.

FinCEN Form 114 Business Filers: Definition of the United States

I have already explored the FBAR definition of the United States in another article. Hence, I will only briefly state the rule here. 31 CFR 1010.100(hhh) defines the United States for FBAR purposes as: the States of the United States, the District of Columbia, the Indian Lands (as defined in the Indian Gaming Regulatory Act) and the territories and insular possessions of the United States.

Thus, a business entity formed in Guam is considered a US person for FBAR purposes. Similarly, a partnership formed in Delaware by two non-resident aliens is also a US person. Even an entity created under the laws of the Commonwealth of Puerto Rico will still be a US person. If these entities have foreign financial and bank accounts which exceed the FBAR filing threshold, they will also be considered FinCEN Form 114 business filers.

Contact Sherayzen Law Office for Professional FBAR Help

If you are a US business entity which maintains foreign accounts outside of the United States, please consider contacting Sherayzen Law Office for professional legal help. We have extensive experience in helping US businesses to comply with their FBAR requirements as well as to remedy their past FBAR noncompliance through an offshore voluntary disclosure.

Contact Us Today to Schedule Your Confidential Consultation!

This article focuses on FinCEN Form 114 business filers and is part of the series of articles on FinCEN Form 114 filers. The series began with the article that FBAR and Form 114a are the same form, then another article on the FBAR definition of the United States and still another article on the FinCEN Form 114 Filers (with the focus on the individual filers). Future articles are planned to continue this series.

FinCEN Form 114 Filers | FBAR Tax Lawyer & Attorney Minnesota Minneapolis

The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (a/k/a FBAR) is arguably the most important information return concerning foreign accounts. Its importance stems first and foremost from the extremely severe Form 114 penalties, which range from criminal penalties of up to 10 years in prison to willful and even non-willful penalties that may exceed the value of the penalized accounts. Given these penalties, it is important to understand who the FinCEN Form 114 filers are – i.e. who is required to file Form 114?

For today’s purposes, I will concentrate only on the individual FinCEN Form 114 filers.

FinCEN Form 114 Filers: General Definition

At the center of the definition of FBAR filer is a United States person (“US person”). A US person must file FinCEN Form 114 if he has a financial interest in or signatory authority or any other authority over any foreign financial accounts and the aggregate maximum value of these accounts exceeds $10,000 at any time during the calendar year.

FinCEN Form 114 Filers: Main Categories of US Persons

Under the 31 CFR 1010.350(b), the definition of a US Person is very specific and consists of five main categories: (1) a citizen of the United States; (2) a resident of the United States; (3) an entity created or organized in the United States or under the laws of the United States; (4) a trust formed under the laws of the United States; and (5) an estate formed under the laws of the United States. As I stated above, today, I will focus only on categories 1 and 2; I will deal with business, trust and estate FinCEN Form 114 filers in other articles.

FinCEN Form 114 Filers: US Citizens

This is by far the easiest category of FinCEN Form 114 filers to analyze. If an individual is a US citizen and has foreign accounts that exceed the filing threshold, then, he must file Form 114.

FinCEN Form 114 Filers: Definition of “Residents of the United States”

In the context of FBAR compliance, a “resident of the United States” has a special meaning which corresponds for the most part, but not exactly, to the US income tax definition of a tax resident. There are three distinct categories of individuals who fall within the definition of a “resident of the United States” for FBAR purposes: US permanent residents, persons who satisfy the Substantial Presence Test, and certain non-resident aliens who make the first-year election to be treated as US tax residents. Additionally, Internal Revenue Code (“IRC”) §7701(b)(2) contains a number of provisions that regulate when individuals are considered to be US residents for FBAR (as well as income tax) purposes during the first-year and the last-year of residency.

FinCEN Form 114 Filers: US Permanent Residents

The first category of residents of the United States is not complex. All US Permanent are US persons and, if they have foreign accounts that exceed the FBAR filing threshold, also FinCEN Form 114 filers.

FinCEN Form 114 Filers: Substantial Presence Test

The second category of residents of the United States for FBAR purposes are the individuals who satisfied the Substantial Presence Test described in IRC §7701(b)(3). Under the Substantial Presence Test, an individual is a US person if: (1) he was present in the United States (as defined under 31 CFR 1010.100(hhh)) for at least 31 days during the calendar year in question; and (2) the sum of the number of days on which such individual was present in the United States during the current year and the two preceding calendar years equals or exceeds 183 days. The amount of days in the two preceding years should multiplied by the applicable multiplier as follows: first preceding year – one-third; second preceding year – one-sixth.

For example, if we are trying to determine the tax residency for the tax year 2019, we will take all the sum of the days an individual was physically present in the United States in 2019, one-third of the days in 2018 and one-sixth of the days in 2017. If the total amount equals or exceeds 183 days, then this individual is a US person for FBAR purposes.

It should be pointed out that this is the general rule. There are numerous exceptions to the Substantial Present Test, including the famous “closer connection exception” and certain visa exemptions. Hence, you should retain an international tax attorney to analyze your specific set of facts in order to determine whether you should be considered a US person for FBAR purposes.

FinCEN Form 114 Filers: First-Year Residency Election

The third category of residents of the United States for FBAR purposes includes all individuals who made a first-year election on their US tax returns to be treated as residents pursuant to IRC §7701(b)(4). Generally, we are talking about a situation where a person does not have a green card, does not meet the Substantial Presence Test and comes sometime during a year. In other words, this person is not a US person under any other category, but decides to make an election to be treated as a US tax resident.

In order to make this election, the person must satisfy certain requirements outlined in IRC §7701(b)(4). Failure to meet any of these requirements will result in a person becoming a non-resident alien for the entire year.

It is also important not to confuse the IRC §7701(b)(4) election with the IRC §6013(g) or (h) election. In the latter cases, the elections do not affect the residency status for FBAR purposes.

FinCEN Form 114 Filers: First- and Last-Year Residency Provisions of IRC §7701(b)(2)

IRC §7701(b)(2) is not technically a fourth category of a resident of the United States. Rather, this section regulates when US residency actually starts or ends once it is acquired or lost under other categories. Nevertheless, it is important to understand and be aware of these provisions.

FinCEN Form 114 Filers: Tax Treaties & FBAR Residency Status

Most tax treaties contain what are known as “tie-breaker provisions” for determining a person’s tax residency. Sometimes, a person can use these provisions to escape the income tax residency rules. The IRS has specifically stated that, as long as one of the residency test of IRC §7701(b) is met, the tax treaty non-residency determination does not affect the residency status of a person for FBAR purposes.

Contact Sherayzen Law Office for the Determination of Whether You and Your Family Should Be Considered FinCEN Form 114 Filers

If you have foreign bank accounts, you should contact Sherayzen Law Office for professional help concerning whether you need to file an FBAR. Sherayzen Law Office is a highly-experienced international tax law firm which has helped hundreds of US taxpayers with their FBAR issues. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

FBAR United States Definition | FBAR Lawyer & Attorney Minneapolis MN

The United States is defined differently with respect to different parts (and, sometimes even within the same part) of the United States Code. There is a specific definition of the United States for FBAR Purposes. In this brief essay, I would like to discuss the FBAR United States Definition and explain its importance to FBAR compliance.

Importance of FBAR United States Definition to FinCEN Form 114

Before we discuss the FBAR United States Definition, we need to the context in which it is used and why it is important for US international tax purposes. FBAR is a common acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. It used to be known under a different name – TD F 90-22.1.

FBAR is part of Title 31, Bank Secrecy Act, but the IRS has administered FBAR since 2001. The IRS primarily uses FBAR not to fight financial crimes (which was its original purpose), but for tax enforcement. In particular, the IRS found that FBAR is an extremely useful tool for combating tax evasion associated with a strategy of hiding money in secret foreign bank accounts.

FBAR’s draconian penalties is what makes this form the favorite with the IRS, but much hated by US taxpayers. The penalties range from a jail sentence to civil willful penalties and even civil non-willful penalties which may exceed a taxpayer’s net worth.

It is precisely these penalties which make it absolutely necessary for US taxpayers to understand when they need to file FBARs. One of the aspects of this understanding is the FBAR United States Definition, which allows one to determine two things. First, the FBAR United States Definition is used to define the United States for the purposes of the Substantial Presence Test. Second, the FBAR United States Definition allows one to classify bank accounts as foreign or domestic for FBAR compliance purposes.

FBAR United States Definition

31 CFR 1010.100(hhh) contains the FBAR United States Definition. Under this provision, the United States is defined as: the States of the United States, the District of Columbia, the Indian Lands (as defined in the Indian Gaming Regulatory Act) and the territories and insular possessions of the United States. As of February 3, 2019, the US territories and insular possessions refer to: Puerto Rico, Guam, American Samoa, US Virgin Islands and Northern Mariana Islands.

Contact Sherayzen Law Office for Professional FBAR Help

If you have undisclosed foreign accounts, you should contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers around the world with their FBAR issues, and We can help You! Contact Us Today to Schedule Your Confidential Consultation!

2018 FBAR Currency Conversion Rates | FBAR Tax Lawyer & Attorney

2018 FBAR and 2018 Form 8938 instructions both require that 2018 FBAR Currency Conversion Rates be used to report the required highest balances of foreign financial assets on these forms. In the case of 2018 Form 8938, the 2018 FBAR Currency Conversion Rates is the default choice, not an exclusive one.

The U.S. Department of Treasury  already published the 2018 FBAR Currency Conversion Rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).

Since the 2018 FBAR Currency Conversion Rates are very important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2018 FBAR Currency Conversion Rates (note that the readers still need to refer to the official website for any updates).

 

Country – Currency

Foreign Currency to $1.00

AFGHANISTAN – AFGHANI

74.576

ALBANIA – LEK

107.05

ALGERIA – DINAR

117.898

ANGOLA – KWANZA

310.0000

ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR

2.7000

ARGENTINA – PESO

37.642

ARMENIA – DRAM

485.0000

AUSTRALIA – DOLLAR

1.4160

AUSTRIA – EURO

0.8720

AZERBAIJAN – NEW MANAT

1.7000

BAHAMAS – DOLLAR

1.0000

BAHRAIN – DINAR

0.3770

BANGLADESH – TAKA

84.0000

BARBADOS – DOLLAR

2.0200

BELARUS – NEW RUBLE

2.1600

BELGIUM – EURO

0.8720

BELIZE – DOLLAR

2.0000

BENIN – CFA FRANC

568.6500

BERMUDA – DOLLAR

1.0000

BOLIVIA – BOLIVIANO

6.8500

BOSNIA – MARKA

1.7060

BOTSWANA – PULA

10.6610

BRAZIL – REAL

3.8800

BRUNEI – DOLLAR

1.3610

BULGARIA – LEV

1.7070

BURKINA FASO – CFA FRANC

568.6500

BURUNDI – FRANC

1790.0000

CAMBODIA (KHMER) – RIEL

4103.0000

CAMEROON – CFA FRANC

603.8700

CANADA – DOLLAR

1.3620

CAPE VERDE – ESCUDO

94.8800

CAYMAN ISLANDS – DOLLAR

0.8200

CENTRAL AFRICAN REPUBLIC – CFA FRANC

603.8700

CHAD – CFA FRANC

603.8700

CHILE – PESO

693.0800

CHINA – RENMINBI

6.8760

COLOMBIA – PESO

3245.8000

COMOROS – FRANC

428.1400

CONGO, DEM. REP – CONGOLESE FRANC

1630.0000

COSTA RICA – COLON

603.5000

COTE D’IVOIRE – CFA FRANC

568.6500

CROATIA – KUNA

6.3100

CUBA – PESO

1.0000

CYPRUS – EURO

0.8720

CZECH REPUBLIC – KORUNA

21.9410

DENMARK – KRONE

6.5170

DJIBOUTI – FRANC

177.0000

DOMINICAN REPUBLIC – PESO

49.9400

ECUADOR – DOLARES

1.0000

EGYPT – POUND

17.8900

EL SALVADOR – DOLARES

1.0000

EQUATORIAL GUINEA – CFA FRANC

603.8700

ERITREA – NAKFA

15.0000

ESTONIA – EURO

0.8720

ETHIOPIA – BIRR

28.0400

EURO ZONE – EURO

0.8720

FIJI – DOLLAR

2.1080

FINLAND – EURO

0.8720

FRANCE – EURO

0.8720

GABON – CFA FRANC

603.8700

GAMBIA – DALASI

50.0000

GEORGIA – LARI

2.6700

GERMANY – EURO

0.8720

GHANA – CEDI

4.8250

GREECE – EURO

0.8720

GRENADA – EAST CARIBBEAN DOLLAR

2.7000

GUATEMALA – QUENTZAL

7.7150

GUINEA – FRANC

9076.0000

GUINEA BISSAU – CFA FRANC

568.6500

GUYANA – DOLLAR

215.0000

HAITI – GOURDE

77.1180

HONDURAS – LEMPIRA

25.0000

HONG KONG – DOLLAR

7.8320

HUNGARY – FORINT

280.1700

ICELAND – KRONA

116.1100

INDIA – RUPEE

69.8000

INDONESIA – RUPIAH

14440.0000

IRAN – RIAL

42000.0000

IRAQ – DINAR

1138.0000

IRELAND – EURO

0.8720

ISRAEL – SHEKEL

3.7490

ITALY – EURO

0.8720

JAMAICA – DOLLAR

126.0000

JAPAN – YEN

109.8500

JERUSALEM – SHEKEL

3.7490

JORDAN – DINAR

0.7080

KAZAKHSTAN – TENGE

375.1500

KENYA – SHILLING

101.8000

KOREA – WON

1114.4900

KOSOVO – EURO

0.8720

KUWAIT – DINAR

0.3030

KYRGYZSTAN – SOM

69.8000

LAOS – KIP

8535.0000

LATVIA – EURO

0.8720

LEBANON – POUND

1500.0000

LESOTHO – SOUTH AFRICAN RAND

14.3500

LIBERIA – DOLLAR

156.7100

LIBYA – DINAR

1.3860

LITHUANIA – EURO

0.8720

LUXEMBOURG – EURO

0.8720

MACAO – MOP

no listing

MACEDONIA FYROM – DENAR

53.5000

MADAGASCAR – ARIARY

3470.2000

MALAWI – KWACHA

733.0000

MALAYSIA – RINGGIT

4.1300

MALI – CFA FRANC

568.6500

MALTA – EURO

0.8720

MARSHALL ISLANDS – DOLLAR

1.0000

MARTINIQUE – EURO

0.8720

MAURITANIA – OUGUIYA

36.0000

MAURITIUS – RUPEE

34.1500

MEXICO – PESO

19.6540

MICRONESIA – DOLLAR

1.0000

MOLDOVA – LEU

16.9930

MONGOLIA – TUGRIK

2642.9200

MONTENEGRO – EURO

0.8720

MOROCCO – DIRHAM

9.5300

MOZAMBIQUE – METICAL

61.5300

MYANMAR – KYAT

1535.0000

NAMIBIA – DOLLAR

14.3500

NEPAL – RUPEE

111.6000

NETHERLANDS – EURO

0.8720

NETHERLANDS ANTILLES – GUILDER

1.7800

NEW ZEALAND – DOLLAR

1.4900

NICARAGUA – CORDOBA

32.3000

NIGER – CFA FRANC

568.6500

NIGERIA – NAIRA

361.0000

NORWAY – KRONE

8.6800

OMAN – RIAL

0.3850

PAKISTAN – RUPEE

138.6000

PALAU – DOLLAR

1.0000

PANAMA – BALBOA

1.0000

PAPUA NEW GUINEA – KINA

3.2840

PARAGUAY – GUARANI

5956.0000

PERU – NUEVO SOL

3.3750

PHILIPPINES – PESO

52.4900

POLAND – ZLOTY

3.7530

PORTUGAL – EURO

0.8720

QATAR – RIYAL

3.6400

ROMANIA – NEW LEU

4.0690

RUSSIA – RUBLE

69.6800

RWANDA – FRANC

890.0000

SAO TOME & PRINCIPE – NEW DOBRAS

21.5350

SAO TOME & PRINCIPE – DOBRAS

20941.0080

SAUDI ARABIA – RIYAL

3.7500

SENEGAL – CFA FRANC

568.6500

SERBIA – DINAR

103.3900

SEYCHELLES – RUPEE

13.5500

SIERRA LEONE – LEONE

8620.0000

SINGAPORE – DOLLAR

1.3610

SLOVAK REPUBLIC – EURO

0.8720

SLOVENIA – EURO

0.8720

SOLOMON ISLANDS – DOLLAR

7.7520

SOMALI – SHILLING

575.0000

SOUTH AFRICA – RAND

14.3500

SOUTH SUDANESE – POUND

153.7000

SPAIN – EURO

0.8720

SRI LANKA – RUPEE

182.6000

ST LUCIA – EC DOLLAR

2.7000

SUDAN – SUDANESE POUND

47.0000

SURINAME – GUILDER

7.5200

SWAZILAND – LILANGENI

14.3500

SWEDEN – KRONA

8.9380

SWITZERLAND – FRANC

0.9840

SYRIA – POUND

515.0000

TAIWAN – DOLLAR

30.5880

TAJIKISTAN – SOMONI

9.3500

TANZANIA – SHILLING

2295.0000

THAILAND – BAHT

32.3500

TIMOR – LESTE DILI

1.0000

TOGO – CFA FRANC

568.6500

TONGA – PA’ANGA

2.1730

TRINIDAD & TOBAGO – DOLLAR

6.7700

TUNISIA – DINAR

3.0090

TURKEY – LIRA

5.2830

TURKMENISTAN – NEW MANAT

3.4910

UGANDA – SHILLING

3705.0000

UKRAINE – HRYVNIA

27.7000

UNITED ARAB EMIRATES – DIRHAM

3.6730

UNITED KINGDOM – POUND STERLING

0.7810

URUGUAY – PESO

32.3200

UZBEKISTAN – SOM

8310.0000

VANUATU – VATU

111.6900

VENEZUELA – BOLIVAR – SOBERANO

563.9800

VENEZUELA – BOLIVAR – FUERTE

248832.0000

VIETNAM – DONG

23190.0000

WESTERN SAMOA – TALA

2.5350

YEMEN – RIAL

480.0000

ZAMBIA – NEW KWACHA

11.9000

ZIMBABWE – DOLLAR

1.0000

FinCEN Form 114 and FBAR Are the Same Form | FBAR Tax Lawyers

In my practice, I often receive phone calls from prospective clients who treat FinCEN Form 114 and FBAR as two different forms. Of course, these are the same forms, but I have asked myself: why do so many taxpayers believe that FinCEN Form 114 and FBAR are two different forms?

The simplest answer, of course, would be that taxpayers are simply so unfamiliar with US international tax law that they do not know the form with which both titles, FinCEN Form 114 and FBAR, should be associated. There is definitely a lot of truth to this conclusion, but it does not tell the whole story.

Upon more profound exploration, I found that a significant amount of potential clients believed that either FBAR or FinCEN Form 114 was a tax form while the other form was something else. In other words, some of the taxpayers think that FinCEN Form 114 is a tax form while FBAR is not a tax form while other taxpayers believe that FBAR is a tax form while FinCEN Form 114 is something else.

After making this discovery, I realized that the very nature of FBAR is at the heart of the problem, because FBAR is not a tax form and has nothing to do with Title 26 (i.e. the Internal Revenue Code) of the United States Code. Rather, the Report of Foreign Bank and Financial Accounts, FinCEN Form 114, commonly known as FBAR, was created by the Bank Secrecy Act of 1970. The Bank Secrecy Act forms part of Title 31 of the United States Code. In fact, prior to September 11, 2001, the IRS had almost nothing to do with FBAR.

It was only after the 9/11 terrorist attacks in the United States when the Congress decided to turn over the enforcement of FBAR to the IRS. Initially, the official purpose was to facilitate the Treasury Department’s fight against terrorism. Within a year, though, it became clear that the IRS would use FBAR in its fight against offshore tax evasion and other noncompliance with US international tax laws.

Using the draconian FBAR penalty structure (at that time, the form was still called TD F 90-22.1) against noncompliant US taxpayers turned out to be a highly effective intimidation tool for the IRS – a tool which works very well even today. Once the Treasury Department mandated the e-filing of FBARs, the name of FBAR was changed from TD F 90-22.1 to FinCEN Form 114.

Thus, the confusion over the relationship between FinCEN Form 114 and FBAR stems from FBAR’s peculiar legal history. Most of US taxpayers do not know any of it; they are simply confused by the fact that the IRS is enforcing a form that has two names and which has nothing to do with the Internal Revenue Code.