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Joint Account FBAR Reporting | FBAR Tax Lawyer & Attorney

As an FBAR tax attorney, I constantly deal with the issues of joint account FBAR reporting. In most cases, the joint account FBAR reporting goes relatively smooth, but problems may surface from time to time. In this essay, I would like to address the general issues concerning joint account FBAR reporting.

Joint Account FBAR Reporting: FBAR Background

FBAR is the acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. A US person has to file an FBAR if he has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts the aggregate value of which exceeds $10,000 at any point during the relevant calendar year.

It is important to emphasize that, with respect to joint accounts, each joint owner takes the entire value of the account in calculating whether he or she exceeded the $10,000 filing threshold.

A US person should file an FBAR separately from the tax return. Since 2016 FBAR, the Congress aligned the FBAR filing deadline with that of an income tax return (i.e. April 15). For example, the 2018 FBAR is due on April 15, 2019.

Joint Account FBAR Reporting: Joint Owners

If two or more persons jointly maintain or own a partial interest in a foreign bank or financial account, then each of these persons has a financial interest in that account. Hence, as long as they are US persons, each of these US persons has to report the account on his or her FBAR.

Moreover, each of the filers must also indicate the principal joint owner of the joint account, even if this owner is not a US person. I wish to repeat this important point: the joint owner must be disclosed on FBAR even if he is not a US person. Besides the name of the joint owner, the filer must report the joint owner’s address and tax identification number (US or foreign).

Joint Account FBAR Reporting: Report the Entire Value of the Account

Even though the same joint account may be reported at least twice, FinCEN requires the FBAR filer to disclose the entire value of each jointly-owned foreign account on his FBAR.

Joint Account FBAR Reporting: Exception for Spouses

In certain circumstances, spouses may file a joint FBAR. This means that the spouse of an FBAR filer may not be required to file a separate FBAR, but she can join her husband in filing one FBAR for both of them.

In order to qualify for this exception, the spouses must meet the following three conditions. First and most important, all of the financial accounts that the non-filing spouse has to report are jointly owned with the filing spouse. The filing spouse may have additional accounts, but the non-filing spouse should not have any other foreign bank and financial accounts. Beware, however, that if one spouse is an owner of a foreign account, but the other spouse only has a signatory authority over the same account, then separate FBARs must be filed by each spouse.

Second, the filing spouse reports the jointly owned accounts on a timely filed FBAR and a PIN is used to sign item 44.

Third, both spouses must complete and sign Form 114a, a Record of Authorization to Electronically File FBARs (maintained with the filers’ records).

Contact Sherayzen Law Office for Professional Help With Joint Account FBAR Reporting

If you have foreign bank and financial accounts, you should contact Sherayzen Law Office for professional help with US international tax compliance and FBAR reporting. We have helped hundreds of US taxpayers with their FBAR filings, including joint FBAR filings, and we can help you!

Contact Us Today to Schedule Your Confidential Consultation!

FBAR Third-Party Verification and FATCA | FBAR Tax Lawyer Denver

There is an interesting relationship between the FBAR Third-Party Verification problem and the enaction of FATCA that I would like to explore in this brief article.

Lack of FBAR Third-Party Verification

FBAR is undoubtedly one of the most important information returns administered by the IRS. It is the reigning king with respect to reporting of foreign financial accounts. Its requirements are broad and easy to violate. Its penalty system is unmatched in severity by any form created pursuant to the Internal Revenue Code making FBAR also one of the most effective tax enforcement tools in the IRS enforced tax compliance arsenal.

Yet, as an information return (as opposed to a tax enforcement mechanism), FBAR suffers from a very important defect that has limited its use with respect to collection of information – there is no FBAR Third-Party Verification. In other words, no third parties (such as banks and other financial institutions) are required to submit any data to the IRS so that the IRS can verify the information provided on the filed FBARs.

The fact that there is no FBAR Third-Party Verification stands in stark contract with most other reports required by the Bank Secrecy Act (which created the FBAR). CTRs, CTRCs and Forms 8300 all require banks, casinos and specified businesses to verify the data submitted on these reports. This makes the FBAR the only self-reporting information return with no third-party verification.

Without the FBAR Third-Party Verification, there is no direct way for the IRS to determine whether the information submitted on FBARs is correct. Of course, the IRS can verify the information in an indirect way (such as a treaty request during an investigation of a particular individual or if the information was shared by a financial institution pursuant for some specific reason), but it can only be done with respect to specific taxpayers with significant allocation of resources to each case.

FATCA As a Way to Correct the Lack of FBAR Third-Party Verification

While the Foreign Account Tax Compliance Act (“FATCA”) was not specifically tied to the problems with FBAR, the lack of FBAR Third-Party Verification provided an additional incentive for the enaction of FATCA.

As explained above, the IRS needed to somehow resolve the FBAR problems and find a way to standardize the verification of the foreign account information so that it could be applicable to all US taxpayers. FATCA became the most effective solution. On the one hand, FATCA forced all taxpayers with specified foreign assets to file Forms 8938 with their tax returns, while, on the other hand, it required all foreign financial institutions to verity this data through submission of FATCA-related information on an annual basis.

In other words, FATCA solved the FBAR Third-Party Verification problem. From 2011 on, the IRS acquired valuable tools to fill-in the information gaps left by FBAR. Furthermore, the information collected through FATCA may now be used by the IRS to verify the FBAR information and pursue noncompliant taxpayers for FBAR violations based on the FBAR draconian penalty system.

Contact Sherayzen Law Office for Help with US Tax Compliance Concerning Foreign Bank and Financial Accounts

If you have undisclosed foreign bank and financial accounts, contact Sherayzen Law Office for professional help as soon as possible. Through FATCA third-party information verification, noncompliant US taxpayers are now at a historically-high risk of detection by the IRS. If this happens, they may be subject to extremely high FBAR penalties, including criminal penalties.

Sherayzen Law Office can help you! We have successfully resolved hundreds of FBAR noncompliance cases for US taxpayers residing all over the world. Contact Us Today to Schedule Your Confidential Consultation!