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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!

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.

FBAR Noncompliance & Taxpayer’s Options | FBAR Lawyer & Attorney

FBAR noncompliance is the worst nightmare for US taxpayers due to enormous FBAR penalties even for non-willful taxpayers. US Taxpayers who are not facing an IRS examination or a DOJ (US Department of Justice) lawsuit have three options with respect to their FBAR noncompliance: (1) do nothing with respect to correcting their prior FBAR noncompliance, close the accounts and hope that the IRS will never discover them; (2) do a quiet disclosure; and (3) come forward and voluntarily disclose their unfiled FBARs.

I already explored the highly-risky strategy of a quiet disclosure in another article. In this article, I will focus on option #1 – doing nothing about prior FBAR noncompliance. In the next article, I will discuss the option of Offshore Voluntary Disclosure as a way to deal with prior FBAR noncompliance.

This article does not constitute legal advice, but merely provides information for educational purposes.

Advantages of Doing Nothing With Respect to Prior FBAR Noncompliance

Doing nothing with respect to FBAR noncompliance is a position that some taxpayers prefer, because it requires no action, no immediate legal expenses and no immediate payment of IRS penalties.

In other words, if a taxpayer chooses to do nothing with respect to his late unfiled FBARs and his strategy is successful, he stands to gain in two aspects: (1) he spends no effort, time or money on correcting his past FBAR noncompliance; and (2) if (and this is big “if”) the IRS never finds out about his past FBAR noncompliance, he will not pay any penalties. This whole strategy is based on the hope that the IRS will not find out about their FBAR noncompliance.

Disadvantages of Doing Nothing With Respect to Prior FBAR Noncompliance Even If the Strategy Is Successful

From legal perspective, this strategy of doing nothing can be classified as very risky. If unsuccessful, a noncompliant taxpayer who chooses to do nothing stands to lose a lot more than he could ever gain if his strategy works.

Let’s analyze the disadvantages of doing nothing based on two scenarios: the strategy is successful and the strategy is unsuccessful.

Even if the strategy is ultimately successful and the IRS does not find out about FBAR noncompliance, there is still a heavy psychological price to pay for this success, because the taxpayer will not find out about the success of his strategy until the FBAR statute of limitations expires. In other words, for six long years, the taxpayer will not have any peace of mind and will constantly worry about his potential FBAR penalty exposure. If the taxpayer does not close his foreign accounts, the waiting period could be extended even further.

Moreover, if FBAR noncompliance is combined with income noncompliance and failure to file other US international information returns, the statute of limitations on the tax returns might be open for an indefinite period of time (especially if the IRS can assert a fraud claim against the noncompliant taxpayer).

I have personally seen the psychological effects of such pressure on some of my clients. It was simply destroying their lives. Eventually, they could not live like this and came to me to do offshore voluntary disclosure to resolve their prior FBAR noncompliance.

Disadvantages of Doing Nothing With Respect to Prior FBAR Noncompliance Where the Strategy Fails

If the success of this strategy exhorts such a heavy price, its failure may potentially result in disastrous consequences. Let’s explore the main two reasons why the strategy of doing nothing is so disfavored among international tax lawyers.

First, as described above, the current international tax enforcement structure severely undermines the entire basis for the strategy – i.e. hope that the IRS will not find out about FBAR noncompliance is simply too risky in the contemporary world dominated by FATCA, CRS and a widely-spread web of bilateral and multilateral automatic information exchange treaties. It is still possible that the IRS will not find out about a US person’s foreign accounts, but it is becoming less and less likely.

Second, since the strategy of doing nothing implies a taxpayer’s conscious choice not to comply with the FBAR requirements, it may turn a relatively simple and non-willful situation into a complex and willful one. In other words, under these circumstances, if the IRS is able to find out about prior FBAR noncompliance, the IRS may pursue willful and, in extreme circumstances, even criminal FBAR penalties.

Contact Sherayzen Law Office for Professional Help With Resolving FBAR Noncompliance Issues

If you never filed your required FBARs and other US tax forms, contact Sherayzen Law Office for professional help. Our legal team is headed by one of the most experienced international tax lawyers in this area – Mr. Eugene Sherayzen. He has helped hundreds of US taxpayers around the world to successfully resolve their prior FBAR noncompliance, and He can help You!

Contact Us Today to Schedule Your Confidential Consultation!

2017 FBAR Currency Conversion Rates | FBAR Lawyer and Attorney

Using proper currency conversion rates is a very important part of preparing 2017 FBAR and 2017 Form 8938. The instructions to both forms require (in case of FATCA Form 8938, this is the default choice) US taxpayers to use the 2017 FBAR Currency Conversion Rates published by the Treasury Department. The 2017 FBAR Currency Conversion Rates may also be used for other purposes, not just the preparation of the 2017 FBAR and Form 8938.

The 2017 FBAR Currency Conversion Rates are the December 31, 2017 rates officially published by the U.S. Department of Treasury (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”) and they are the proper conversion rates that must be used while preparing FBAR and Form 8938.

Due to this importance of the 2017 FBAR Currency Conversion Rates to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below the official 2017 FBAR Currency Conversion Rates (keep in mind, you still need to refer to the official website for any updates).

 

Country – Currency

Foreign Currency to $1.00

AFGHANISTAN – AFGHANI

69.3200

ALBANIA – LEK

110.6000

ALGERIA – DINAR

114.6590

ANGOLA – KWANZA

170.0000

ANTIGUA – BARBUDA – E. CARIBBEAN DOLLAR

2.7000

ARGENTINA – PESO

19.1600

ARMENIA – DRAM

485.0000

AUSTRALIA – DOLLAR

1.2790

AUSTRIA – EURO

0.8330

AZERBAIJAN – NEW MANAT

1.7100

BAHAMAS – DOLLAR

1.0000

BAHRAIN – DINAR

0.3770

BANGLADESH – TAKA

82.0000

BARBADOS – DOLLAR

2.0200

BELARUS – NEW RUBLE

1.9730

BELGIUM – EURO

0.8330

BELIZE – DOLLAR

2.0000

BENIN – CFA FRANC

562.3300

BERMUDA – DOLLAR

1.0000

BOLIVIA – BOLIVIANO

6.8600

BOSNIA – HERCEGOVINA – MARKA

1.6300

BOTSWANA – PULA

9.8040

BRAZIL – REAL

3.3120

BRUNEI – DOLLAR

1.3420

BULGARIA – LEV

1.6310

BURKINA FASO – CFA FRANC

562.3300

BURMA – KYAT

1354.0000

BURUNDI – FRANC

1720.0000

CAMBODIA (KHMER) – RIEL

4103.0000

CAMEROON – CFA FRANC

567.7900

CANADA – DOLLAR

1.2550

CAPE VERDE – ESCUDO

92.0260

CAYMAN ISLANDS – DOLLAR

0.8200

CENTRAL AFRICAN REPUBLIC – CFA FRANC

567.7900

CHAD – CFA FRANC

567.7900

CHILE – PESO

614.2300

CHINA – RENMINBI

6.5040

COLOMBIA – PESO

2981.7900

COMOROS – FRANC

411.0000

CONGO – CFA FRANC

567.7900

CONGO, DEM. REP – CONGOLESE FRANC

1580.0000

COSTA RICA – COLON

564.0000

COTE D’IVOIRE – CFA FRANC

562.3300

CROATIA – KUNA

6.2300

CUBA – PESO

1.0000

CYPRUS – EURO

0.8330

CZECH REPUBLIC – KORUNA

20.8840

DENMARK – KRONE

6.2070

DJIBOUTI – FRANC

177.0000

DOMINICAN REPUBLIC – PESO

48.1100

ECAUDOR – DOLARES

1.0000

EGYPT – POUND

17.7300

EL SALVADOR – DOLARES

1.0000

EQUATORIAL GUINEA – CFA FRANC

567.7900

ERITREA – NAKFA

15.0000

ESTONIA – EURO

0.8330

ETHIOPIA – BIRR

27.2000

EURO ZONE – EURO

0.8330

FIJI – DOLLAR

2.0170

FINLAND – EURO

0.8330

FRANCE – EURO

0.8330

GABON – CFA FRANC

567.7900

GAMBIA – DALASI

47.0000

GEORGIA – LARI

2.6100

GERMANY FRG – EURO

0.8330

GHANA – CEDI

4.5200

GREECE – EURO

0.8330

GRENADA – EAST CARIBBEAN DOLLAR

2.7000

GUATEMALA – QUENTZAL

7.3300

GUINEA – FRANC

9004.0000

GUINEA BISSAU – CFA FRANC

562.3300

GUYANA – DOLLAR

215.0000

HAITI – GOURDE

62.9500

HONDURAS – LEMPIRA

23.5000

HONG KONG – DOLLAR

7.8150

HUNGARY – FORINT

258.4500

ICELAND – KRONA

104.0900

INDIA – RUPEE

63.7500

INDONESIA – RUPIAH

13490.0000

IRAN – RIAL

36057.0000

IRAQ – DINAR

1166.0000

IRELAND – EURO

0.8330

ISRAEL – SHEKEL

3.4710

ITALY – EURO

0.8330

JAMAICA – DOLLAR

128.0000

JAPAN – YEN

112.5500

JERUSALEM – SHEKEL

3.4710

JORDAN – DINAR

0.7080

KAZAKHSTAN – TENGE

331.3100

KENYA – SHILLING

103.2000

KOREA – WON

1065.9301

KUWAIT – DINAR

0.3010

KYRGYZSTAN – SOM

69.0000

LAOS – KIP

8274.0000

LATVIA – EURO

0.8330

LEBANON – POUND

1500.0000

LESOTHO – SOUTH AFRICAN RAND

12.3160

LIBERIA – U.S. DOLLAR

125.1700

LIBYA – DINAR

1.3570

LITHUANIA – LITAS

0.8330

LUXEMBOURG – EURO

0.8330

MACAO – MOP

8.0000

MACEDONIA FYROM – DENAR

51.0700

MADAGASCAR – ARIA

3235.6201

MALAWI – KWACHA

731.0000

MALAYSIA – RINGGIT

4.0440

MALI – CFA FRANC

562.3300

MALTA – EURO

0.8330

MARSHALL ISLANDS – DOLLAR

1.0000

MARTINIQUE – EURO

0.8330

MAURITANIA – OUGUIYA

355.0000

MAURITIUS – RUPEE

33.4000

MEXICO – NEW PESO

19.7040

MICRONESIA – DOLLAR

1.0000

MOLDOVA – LEU

17.0580

MONGOLIA – TUGRIK

2427.3999

MONTENEGRO – EURO

0.8330

MOROCCO – DIRHAM

9.3520

MOZAMBIQUE – METICAL

58.8500

NAMIBIA – DOLLAR

12.3160

NEPAL – RUPEE

102.4000

NETHERLANDS – EURO

0.8330

NETHERLANDS ANTILLES – GUILDER

1.7800

NEW ZEALAND – DOLLAR

1.4050

NICARAGUA – CORDOBA

30.6000

NIGER – CFA FRANC

562.3300

NIGERIA – NAIRA

359.0000

NORWAY – KRONE

8.1960

OMAN – RIAL

0.3850

PAKISTAN – RUPEE

110.4000

PALAU – DOLLAR

1.0000

PANAMA – BALBOA

1.0000

PAPUA NEW GUINEA – KINA

3.1350

PARAGUAY – GUARANI

5574.0000

PERU – NUEVO SOL

3.2360

PHILIPPINES – PESO

49.8490

POLAND – ZLOTY

3.4830

PORTUGAL – EURO

0.8330

QATAR – RIYAL

3.6400

ROMANIA – LEU

3.8800

RUSSIA – RUBLE

57.8450

RWANDA – FRANC

855.0000

SAO TOME & PRINCIPE – DOBRAS

20597.2227

SAUDI ARABIA – RIYAL

3.7500

SENEGAL – CFA FRANC

562.3300

SERBIA – DINAR

101.3300

SEYCHELLES – RUPEE

13.3800

SIERRA LEONE – LEONE

7645.0000

SINGAPORE – DOLLAR

1.3360

SLOVAK REPUBLIC – EURO

0.8330

SLOVENIA – EURO

0.8330

SOLOMON ISLANDS – DOLLAR

7.4910

SOMALI – SHILLING

575.0000

SOUTH AFRICA – RAND

12.3160

SOUTH SUDANESE – POUND

126.0000

SPAIN – EURO

0.8330

SRI LANKA – RUPEE

153.4000

ST LUCIA – EC DOLLAR

2.7000

SUDAN – SUDANESE POUND

9.0000

SURINAME – GUILDER

7.5200

SWAZILAND – LILANGENI

12.3160

SWEDEN – KRONA

8.1930

SWITZERLAND – FRANC

0.9750

SYRIA – POUND

515.0000

TAIWAN – DOLLAR

29.6460

TAJIKISTAN – SOMONI

8.7500

TANZANIA – SHILLING

2235.0000

THAILAND – BAHT

32.6000

TIMOR – LESTE – DILI

1.0000

TOGO – CFA FRANC

562.3300

TONGA – PA’ANGA

2.1140

TRINIDAD & TOBAGO – DOLLAR

6.6300

TUNISIA – DINAR

2.4580

TURKEY – LIRA

3.7880

TURKMENISTAN – MANAT

3.4910

UGANDA – SHILLING

3635.0000

UKRAINE – HRYVNIA

28.1450

UNITED ARAB EMIRATES – DIRHAM

3.6730

UNITED KINGDOM – POUND STERLING

0.7400

URUGUAY – PESO

28.7600

UZBEKISTAN – SOM

8030.0000

VANUATU – VATU

105.0000

VENEZUELA – BOLIVAR

3345.0000

VIETNAM – DONG

22708.0000

WESTERN SAMOA – TALA

2.4400

YEMEN – RIAL

250.5000

ZAMBIA – NEW KWACHA

9.9750

ZAMBIA – KWACHA

5455.0000

ZIMBABWE – DOLLAR

1.0000

2017 FBAR Deadline | FinCEN Form 114 FBAR Lawyer & Attorney

FinCEN recently confirmed the 2017 FBAR deadline and the automatic extension option.

2017 FBAR Deadline: FBAR Background

FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is commonly known as FBAR.  US taxpayers should use this form to report their financial interest in or signatory authority over foreign financial accounts. Failure to timely file the FBAR may result in the imposition of draconian FBAR penalties.

2017 FBAR Deadline: Traditional FBAR Deadline

Prior to 2016 FBAR, the taxpayers had to file their FBARs for each relevant calendar year by June 30 of the following year. No filings extensions were allowed. The last FBAR that followed this deadline was 2015 FBAR (its due date was June 30, 2016).

2017 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR

The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR.  Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.

Furthermore, during the transition period, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. The taxpayers do not need to make any specific requests in order for extension to be granted.

In other words, starting 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. Moreover, the new FBAR filing deadline will follow to the letter the federal income tax due date guidance. The federal income tax due date guidance states that, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day.

2017 FBAR Deadline

Based on the new law, the 2017 FBAR deadline will be April 17, 2018 (same as 2017 income tax return due date). If a taxpayer does not file his 2017 FBAR by April 17, 2018, then the IRS will automatically grant an extension until October 15, 2018. Failure to file 2017 FBAR by October 15, 2018, may result in the imposition of FBAR civil and criminal penalties.