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Foreign financial filing due (FinCen 114)

FinCen websiteForm 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
  • Annuities
  • 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.

  1. 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.
  2. Signature authority – you can sign a check or initiate a transfer or payment.
  3. 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.

Conclusion

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.