FinCEN Form 114

FinCEN Form 114, commonly referred to as the FBAR (Foreign Bank and Financial Accounts Report), is a critical filing requirement for U.S. citizens, residents, and certain entities with foreign financial accounts. The primary purpose of this form is to prevent tax evasion by ensuring that individuals disclose their foreign financial holdings, allowing the U.S. government to keep track of overseas assets and accounts. Created under the Bank Secrecy Act (BSA) and administered by the Financial Crimes Enforcement Network (FinCEN), the form has become one of the most important documents in the fight against money laundering, terrorism financing, and tax avoidance.

While the FBAR is not a tax form and does not impact an individual’s tax liabilities, it is a crucial part of the U.S. government’s broader strategy to monitor the movement of funds across borders. As global economies have become more interconnected and individuals frequently invest abroad or open foreign bank accounts, FinCEN Form 114 ensures that these accounts are disclosed, providing transparency and accountability in a world where hidden assets can be used for illicit purposes. Despite its significant role, many filers remain unaware of the requirements, penalties, and complexities associated with the FBAR, leading to unintentional non-compliance.

Who Must File FinCEN Form 114?

The FinCEN Form 114 (FBAR) must be filed by U.S. citizens, residents (including green card holders), and entities such as corporations, partnerships, limited liability companies (LLCs), trusts, and estates that have a financial interest in or signature authority over foreign financial accounts. The critical threshold is whether the aggregate value of these accounts exceeds $10,000 at any point during the calendar year. If, for example, an individual holds two separate foreign accounts with balances of $6,000 and $5,000, they must file an FBAR even though neither account exceeds $10,000 on its own. The $10,000 threshold applies to the combined value of all foreign accounts.

Moreover, the types of foreign financial accounts that must be reported on the FBAR include but are not limited to:

• Bank accounts (savings, checking, or similar accounts)
• Brokerage and securities accounts
• Mutual funds or similar pooled funds
• Certain retirement accounts or pension funds held overseas

Even if the account generates no interest or income, or if the funds within it have already been taxed, the requirement to file still exists. Additionally, individuals with signatory authority over foreign accounts but no direct financial interest (such as officers in a company with foreign accounts) must also file.

How to File FinCEN Form 114?

Unlike tax forms submitted to the IRS, the FBAR is filed electronically through FinCEN’s BSA E-Filing System. The form cannot be mailed or attached to the filer’s regular tax return. Individuals or entities who are required to file can do so themselves by creating an account on the BSA E-Filing website. There is no fee associated with filing the FBAR, and it must be submitted annually by April 15, with an automatic extension to October 15.

To file electronically, follow these steps:

1. Access the BSA E-Filing System: Go to FinCEN’s website and navigate to the BSA E-Filing System.
2. Create an Account (if necessary): If it’s your first time using the system, you’ll need to register by providing basic personal information.
3. Prepare Your Information: Gather details about the foreign accounts you need to report, including the account numbers, maximum balances during the year, and the names of the financial institutions.
4. Fill Out the Form Electronically: Input the required information into the form fields, following the guidance provided by the system.
5. Submit the Form: Once all the information is filled in correctly, submit the form electronically.

It’s important to note that tax professionals, such as Certified Public Accountants (CPAs), enrolled agents (EAs), or tax attorneys, can file the FBAR on behalf of their clients if they are granted the necessary authorization.

FinCEN Form 114 Instructions

FinCEN Form 114 requires specific information about the filer and their foreign accounts. Here is a breakdown of how to complete the form:

1. Part I: Filer Information
   • Filer Type: Indicate whether you are filing as an individual, an entity, or someone with signatory authority.
   • Personal Information: For individuals, provide your name, Social Security Number (SSN), and date of birth. For entities, input the Employer Identification Number (EIN).
   • Contact Information: Include your address, phone number, and email address.
2. Part II: Information on Financial Accounts Owned Jointly
   • If the filer holds accounts jointly with others (e.g., a spouse), provide the names, SSNs, or other identification details of the co-owners. Be sure to note that joint accounts only need to be reported once, but all filers with a financial interest in the account must still submit their FBARs.
3. Part III: Financial Account Information
   • Name of the Financial Institution: Enter the name of the foreign bank or financial institution where the account is held.
   • Account Number or Designation: Provide the account number or other unique identifying number for the account.
   • Account Type: Select the appropriate account type (e.g., bank account, securities account, mutual fund).
   • Maximum Account Value: Indicate the maximum value of the account during the calendar year, converted to U.S. dollars using the Treasury’s year-end exchange rates.
   • Country of Location: Identify the country where the foreign financial account is located.
4. Part IV: Accounts Where You Have Signature Authority
   • If you have signature authority over foreign accounts that are not your own, this section should be completed with the relevant account information, including the name of the account owner and their relationship to you.
5. Part V: Consolidated or Spouse Filing
   • Certain filers, such as entities with multiple foreign accounts or spouses filing jointly, may have the option to consolidate their FBAR filing. Instructions in Part V detail how to use these provisions.

Once all sections are completed, review the information for accuracy before submitting the form electronically.

Failure to file FinCEN Form 114 can result in severe civil and criminal penalties. Civil penalties can range from $12,921 for non-willful violations to $129,210 or 50% of the account balance for willful violations. Criminal penalties include potential fines and imprisonment for intentional evasion or fraud. In cases of non-willful violations, the IRS may exercise discretion and waive penalties if the filer can demonstrate reasonable cause for failing to report.