File by June 30th or Face Huge Penalties

The IRS is getting serious about reporting your foreign financial accounts. If you don’t file the new electronic FinCen 114 by June 30th, you could have a penalty of $10,000 or more.

First, let’s take a step back and look at what it means to have a foreign financial account that needs reporting.

Here are some important definitions:

A financial account includes savings account, checking account, a stock account, commodity futures, cash value of a whole life insurance policy, annuity policy or a mutual fund. It becomes a foreign financial account when the account is outside the US.

Determining whether you have a financial interest is a little more complicated. It’s pretty obvious you have an interest if you are the owner of the account. But, you could also be considered to have a financial interest if you are:

1. An agent, nominee, attorney or person accounting in some capacity of the US taxpayer who owns the account,
2. A 50% or more owner or hold 50% or more of the voting stock in a corporation with an account,
3. Involved with a grantor trust,
4. A 50% or more owner of a trust with an account or
5. A 50% or more owner in any other entity with an account.

If you meet one of the above criteria and your account(s) total $10,000 at any point in the year, you need to file FinCen 114. It’s due by June 30th and there is no extension. New this year, you must also file electronically.

There is no tax due with the filing, but the penalties are huge if you miss the filing.

For the filing, you’ll need to know the financial institutes name and address, your account number and the largest balance in the year. You will need to keep records for 5 years. If the accounts aren’t in USD (US Dollars), you’ll need to convert using the currency conversion at the Treasury site for the end of the year.

The good news with all of this is that you can hire authorized reporters to do the work for you. It’ll still be up to you to make sure you file by June 30th. If you’ve missed some past filings, get with an experienced CPA or attorney right away. You can avoid some of the penalties if you come forward voluntarily.