The IRS must have really wanted a Form that sounds like Foobar or Fubar (they even suggest you search for it on their website) when they came up with FBAR, as the acronym doesn’t even fit what they have:
Report of Foreign Bank and Financial Accounts. In essence if you’re a US type and you have any interest in a foreign account, then you have to report it each year to the IRS.
The FBAR isn’t even filed with your tax return – you have to do it electronically with the FinCEN’s system by the middle of each year – even if the account produces no taxable income. Get this, the penalty for not doing this on time is a minimum $10,000 with additional fines up to 50% of the value of the account. Ouch.
There is a form that taxpayers may have to fill in if they have a balance over the reporting threshold – Form 8938. This goes in with the tax return. The only saving grace that I can see is that you have to report on neither the FBAR or the 8938 your foreign property. Time to stock up on houses overseas then.
FUBAR indeed (military slang not safe for children!)
Here are a few common questions about the FBAR:
When do I have to file my FBAR?
The deadline is June 20th each year.
What value do I put in my FBAR for each account?
The trick here is that they want the maximum value in local currency. Say you had a Mutual Trust in EUR. No matter what the EUR-USD exchange rate is throughout the year, you have to use the maximum value in EUR (or a reasonable approximation).
Which exchange rate do I use to convert the maximum account value into US Dollars?
You have to use the Treasury’s exchange rate for the last day of the calendar year in which you’re reporting. So for reporting 2014 you would go to Treasury’s site exchange rate and look up the rate and look up the rate on 31st December 2014.