FBAR Reporting Update

NEWS UPDATE

FBAR filing deadline and additional accounts subject to reporting

 

NEW FILING DEADLINE

 

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is now the same as for a federal income tax return. This means that the 2016 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 18, 2017. FinCEN will grant filers missing the April 18 deadline an automatic extension until Oct. 16, 2017 to file the FBAR. Specific extension requests are not required. In the past, the FBAR deadline was June 30 and no extensions were available.

 

FILING REQUIREMENTS

 

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account and the highest aggregate value of these accounts exceed $10,000, you are subject to FBAR reporting. Nor IRS nor FinCEN has indicated whether PayPal accounts qualify for FBAR reporting, however, we strongly believe that taxpayers should disclose them. PayPal Europe is duly licenced as a Luxembourg credit institution and therefore falls within the scope of foreign financial institution.

 

In a case United States v. Hom federal district court of California upheld an $30,000 FBAR penalty assessment against an individual who failed to report his interest in a FirePay, PokerStars and PartyPoker account. The Court has held that the term "financial institution" is to be given a broad definition. A “person acting for a person” as a “financial institution” or a person who is “acting in a similar way related to money” is considered a “financial agency.” The Fourth Circuit found that “by holding funds for third parties and disbursing them at their direction, [the organization at issue] functioned as a bank [under Section 5314].”

 

31 U.S. Code § 5312 gives a definition of "financial insitution":

 

“financial agency” means a person acting for a person (except for a country, a monetary or financial authority acting as a monetary or financial authority, or an international financial institution of which the United States Government is a member) as a financial institution, bailee, depository trustee, or agent, or acting in a similar way related to money, credit, securities, gold, or a transaction in money, credit, securities, or gold.

 

“financial institution” means—

  • an insured bank;
  • a commercial bank or trust company;
  • a private banker;
  • an agency or branch of a foreign bank in the United States;
  • any credit union;
  • a thrift institution;
  • a broker or dealer registered with the Securities and Exchange Commission under the Securities Exchange Act of 1934;
  • a broker or dealer in securities or commodities;
  • an investment banker or investment company;
  • a currency exchange;
  • an issuer, redeemer, or cashier of travelers’ checks, checks, money orders, or similar instruments;
  • an operator of a credit card system;
  • an insurance company;
  • a dealer in precious metals, stones, or jewels;
  • a pawnbroker;
  • a loan or finance company;
  • a travel agency;
  • a licensed sender of money or any other person who engages as a business in the transmission of funds, including any person who engages as a business in an informal money transfer system or any network of people who engage as a business in facilitating the transfer of money domestically or internationally outside of the conventional financial institutions system;
  • a telegraph company;
  • a business engaged in vehicle sales, including automobile, airplane, and boat sales;
  • persons involved in real estate closings and settlements;
  • the United States Postal Service;
  • an agency of the United States Government or of a State or local government carrying out a duty or power of a business described in this paragraph;
  • a casino, gambling casino, or gaming establishment with an annual gaming revenue of more than $1,000,000 which—
    • is licensed as a casino, gambling casino, or gaming establishment under the laws of any State or any political subdivision of any State; or
      • is an Indian gaming operation conducted under or pursuant to the Indian Gaming Regulatory Act other than an operation which is limited to class I gaming (as defined in section 4(6) of such Act);
  • any business or agency which engages in any activity which the Secretary of the Treasury determines, by regulation, to be an activity which is similar to, related to, or a substitute for any activity in which any business described in this paragraph is authorized to engage; or
  • any other business designated by the Secretary whose cash transactions have a high degree of usefulness in criminal, tax, or regulatory matters.

 

We therefore strongly suggest that you disclose all of your financial accounts, including PayPal and online gambling accounts.

 

 

 

 

 

 

 

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