Creating any business is a time-consuming endeavor which takes a lot of know-how, time, and dedication which can plague even the most diligent business owner. Being at the helm of a U.S.-only based business is complex enough but a business with foreign interests adds a whole new level of regulations and legal requirements to your business’ reporting and compliance issues. For many, especially for those smaller businesses who do frequent business over our nation’s borders or internationally, complying with all legal requirements imposed by the federal government can prove to be a challenge. In the United States, American citizens must file a Report of Foreign Bank and Financial Accounts if they qualify.
How FBAR Compliance Has Evolved Over the Years
Prior to 2008, FBAR compliance was not as emphasized by the IRS although the law had been on the books since the 1970s. However, given some abuse of the system and a well-publicized scandal, from 2008 on, there has been a reinvigorated effort by the IRS to enforce the law and apply the sometimes substantial penalties that accompany failure to file, late filing, or any other similar action. If you have any questions regarding FBAR compliance, you should immediately reach out to our tax professionals to help clear up any questions you may have.
FBAR Filing Requirements
Below are a few requirements that can help you determine if you need to file a FBAR report:
- You must be a U.S. citizen, corporation, partnership, limited liability company, trust or estate
- Have at least one financial account outside the United States or authority over that financial account
- The total value of the account was more than $10,000 at any time in the calendar year at any point
These broad stroke requirements demonstrate that almost anyone with an interest in an overseas bank account with more than $10,000 in it should err on the side of caution and consult tax professionals sooner rather than later. One of the unique aspects of FBAR compliance is that an interest can be created in a foreign account even when one does not believe there is an immediate interest. For example, a company can be the beneficiary of a foreign trust account with the conditions that the funds are released upon a person’s death or resignation. Although there has been no transfer of money and indeed, the company cannot currently access the money, company leadership would be advised to consult with a tax professional so they can make any relevant FBAR reports.
Contact MKS&H Today
For many companies, international trade does not mean international accounts. If you are at the head of a company that trades around the world but has only U.S.-based accounts, FBAR likely does not apply to you. However, if your company has established accounts in each country you trade in which at any point over the course of a year has exceeded $10,000, you should file an FBAR report to be compliant with the law. Our tax professionals can help you sort out the complex web of tax regulations, so you are not left holding the bag. Contact us today to ensure your international business is in FBAR compliance.