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.
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.