Form FinCen 114 is due June 30, 2016. No extensions are available! Failure to timely file can result in severe penalties as much as 50% of the highest account value and possible criminal charges that can carry a prison sentence.
This is why I ask each year if you have an interest in a foreign financial accounts.
What is a foreign financial account?
As with most things to do with the government, the definition is complex. Generally, a foreign account is any financial asset held at a foreign branch of a financial institution. Some examples:
- Life insurance
- Pensions and other retirement accounts
- Bank accounts
- Brokerage accounts
- Investment accounts
Owning a foreign stock held at a U.S. branch of a financial institution is not a foreign financial account. Nor is a mutual fund that holds foreign stocks when the mutual fund is held at a U.S. branch. (There are other filing requirements if you own a significant amount of any particular foreign company but those rules are beyond the scope of this post.)
When do you have a financial interest?
If you own, have signature authority over or can direct the use of the account then you have an interest in the account.
- Owning an account should be easy to understand – titled in your name either jointly or solely then it is owned by you for these purposes.
- Signature authority – you can sign a check or initiate a transfer or payment.
- Direct the use – if the account is titled in another entity’s (person, company, partnership, etc.) name and you are not listed as a signatory but the owner or signatory will follow your directions, then you have a financial interest. For example, you give your brother $12,000 to deposit into his Bank of Somewhere Other than the U.S. account. Your understanding is he will give the money to you when you visit, then you have a financial interest in that account and must report it.
File now or pay a severe penalty later. The U.S. Treasury requires online filing here. Some tax software companies also provide software for filing purposes.