Don’t Forget: This Year’s New FBAR Must Be Filed Electronically
A friend I caught up with last week in Medellin, an American, told me with a grin that he’d already completed and filed his FBAR for this year. He was pleased with himself for getting it in early…until I reminded him that, starting this year, the FBAR must be filed electronically.
My friend had filled out and mailed in the old TDF 90-22.1. That form has been superseded by a new form—known as FINCEN Form 114—which, again, must be filed online.
I updated subscribers to my Simon Letter service on the new rules months ago, but my friend doesn’t read my newsletter (he admitted) and therefore happily carried on as he’s done for years filing his FBAR by mail. The new FINCEN form looks remarkably similar to the old form but don’t be fooled. The old form won’t do. You can get more details here.
I haven’t filed my form for this year yet but will have to force myself to do it soon. The problem is that the new form and system are not user-friendly, especially if you have more than a few bank accounts to report.
It seems the new system doesn’t save anything from year to year (filing amounts to entering your information into an editable PDF as far as I can tell). That means that we Americans not only must enter all of our account information anew this year but that we will all also have to re-enter all our data from scratch again next year. That isn’t a huge deal if you have one or two bank accounts, but if you’ve got several, it’s a pain in the neck.
And the FBAR is only one piece of our filing requirements as Americans abroad. Any U.S. person living and working outside the United States who has an offshore corporation for his business, a trust, and investments in one or more U.S.-controlled foreign corporations, say, is looking at preparing an annual return of up to a hundred pages. Maybe no tax due but lots of paperwork.
The IRS - Casting Their Ever Expanding Net
A British friend who lives in Costa Rica doesn’t have this filing burden. He’s retired and earns no money in Costa Rica so he doesn’t owe income taxes or file a return in that country. And because he’s not living in the UK, the only tax return he has to complete there has to do with a rental property he owns in the country. In other words, his paperwork requirements as an expat are nothing compared with those of an American living overseas.
The wide net the IRS is casting may be catching some people who have hidden assets offshore without paying taxes on them, but it’s also creating a paperwork burden that many Americans overseas simply don’t want to deal with. They are happy to pay any tax they owe the IRS, but filing gobs of forms just to tell the IRS they don’t owe anything seems contrary to common sense (not to mention the Paperwork Reduction Act). The US$10,000 threshold for filing the FBAR hasn’t been increased since it was initially implemented in 1970, and US$10,000 isn’t what it was back then. That is, it’s not much of a threshold.
Form 8938 likewise has a relatively low threshold for people living in the United States, at US$50,000 for a single and US$100,000 for a couple. Those living outside the States get a break; you need assets of at least US$200,000 as a single and of at least US$400,000 as a couple before you’re required to file this from abroad.
However, Form 8938 reporting must include the same assets in the bank accounts reported on the FBAR. In other words, someone living in the States with a single offshore bank account with US$50,000 in it has to complete both the FBAR and Form 8938. Another slap in the face of the Paperwork Reduction Act…and one reason so many more Americans are dumping their passports.
Meanwhile, if you haven’t given up your U.S. citizenship, make sure you file all the forms you need to…including the FBAR (new form, submitted online) by the end of June.
“Lief, the problem with living in any of the countries that are promoted is that there is not a guarantee that there will not be any civil unrest.
“The countries in Central America have had a short period of government civility. It is not possible to predict unrest at any moment.”
Agreed. Impossible to predict unrest at any moment anywhere, including and especially in the United States.