FBAR reporting guide for US citizens/residents

Tax and legal
1

I started to look into FBAR report filing requirements (FinCEN Report 114) and thought I would share my preliminary thoughts.

A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

(1) a financial interest in or signature or other authority over at least one financial account located outside the United States if
(2) the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

The report is due by April 15 following the calendar year reported.
You must file the FBAR electronically through the Financial Crimes Enforcement Network’s BSA E-Filing System. You don’t file the FBAR with your federal tax return.

There is a FinCEN website that makes this annual report relatively easy.
https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Here are a few things to look out for:

  1. If you have more than 10,000 USD aggregate you must report all foreign accounts.

I have one bank account opened by “accident” with a $0 balance and I am reporting this.

  1. You may have to report all cryptocurrency accounts (regardless of balance). There is some info here about which account may qualify:
    FBAR for Crypto (Regulations for 2024)

  2. If you have a Transferwise account, you will likely need to report balances in any non-USD wallets. You can get the bank info by looking up your IBAN for each account and the IBAN lookup will tell you the address info and name for the “bank”. Transferwise customer support can also help with this. It is not clear whether each non-USD wallet needs to be reported separately. Technically they are different banks so maybe so, but from the US person standpoint you just have one relationship with Transferwise. You will need to make that determination on your own.

  3. For GV investment fund. My initial read of the definition of “financial account” includes a securities account or a GV account. However, the IRS FBAR reference guide excludes private equity funds.

Example: Foreign hedge funds and private equity funds are not reportable on the FBAR. The FBAR
regulations issued by FinCEN on February 24, 2011 do not require the reporting of these funds at this time.
https://www.irs.gov/pub/irs-utl/irsfbarreferenceguide.pdf

Additionally, if you hold interests in a company such as GV investment funds, this appears to qualify as a “Financial Interest” as defined by the law only if certain criteria are met. Based on definition of a “financial interest” there may be a basis to exclude reporting if you have only a small interest in the GV fund.
Thus it would appear the GV investment portion is not reportable on FBAR.

[Edited to correct my initial comment based on input from @jb4422 ]

Note for all of the above you must report the highest balance during the reporting year.

If anyone has a different opinion on any of this, would appreciate any input…

This is not intended as legal or accounting advice, so you should consult your own lawyer or tax professional. Each person’s situation will be unique.

3 Likes
2

That’s a good reminder. I started through the steps of creating a moey.pt account two months ago, but I was blocked on some requirement before it was completed–I think I needed to document that I was a resident of Portugal, which wasn’t identified as a requirement earlier in the process. I will try to nullify that unapproved application before the end of this year so that it won’t be a bother next year when I have to start filing.

My $6 balance of paper silver at bullionstar is an interesting case. It doesn’t trigger a reporting requirement on its own, but I will have to report it next year. Paper ownership of overseas precious metals must be reported. Different rules apply for individually owned, segregated bars but I have never owned anything like that.

3

That seems right.

There’s a lot of discussion around your (4) but I think it’s mostly people trying to avoid reporting stuff, when the intent is pretty clearly “report everything that isn’t nailed down” - which is to say, anything that isn’t tangible property.

My view is that the GV fund is not reportable. You have a depository account at the bank - which is a fancy way of saying “brokerage account minus trading privileges”. The depository account is reportable. You use the account to buy shares in a fund or company. Could be BlueCrow, could be EdP (Energias de Portugal, the electric company). Same difference. You don’t go reporting that you own 500 units of BlueCrow any more than you report 200 shares of EdP. If you did, you’d be double-counting. You report the total value of the securities account, best estimate. IME, the bank will send you an end of year FACTA report essentially telling you what they told the IRS. YMMV of course; I can only speak to what I’ve experienced. I’d ask for it if you don’t get one.

Dividend payments are not the same thing; that’s income, not assets, and FBAR isn’t about income per se. So BlueCrow or EdP can send you dividend payments and that still doesn’t make either one of them reportable entities.

Now, if you had a direct relationship with the fund, e.g. you wired the money to the fund directly and the shares were book-entry with the fund, then the fund would be the reportable entity. However I haven’t seen any of the funds that operate this way, and I’m positive that they don’t do it this way precisely because no fund wants to carry that reporting burden directly; it’s too much of a pain. Banks have to deal with reporting all the time anyway, so structure it in a way such that the bank has to deal with the IRS.

Transferwise is an interesting case. IME, when you have a relationship with a foreign entity, you report that relationship, not the 8-10 IBANs that got created for all the sub accounts. You don’t go reporting that you have a checking AND savings account with PNC Bank to the IRS, you get a combined 1099 from PNC Bank, TIN 12-3456789. That said, I have zero experience with TW, so I have No Idea what’s happening under the hood there to guess other than it scares me.

If this all seems nerve-wracking 'cuz it’s new… I know how you feel. Hell, I remember panicking when I saw a requirement “you MUST keep a copy of all your FBARs” and I realized I’d just been filing and forgetting without photocopying them first. I sent a panicked request off to Dept of Treas (this is before FinCEN) to get all my FBARs so I had a copy. In due course some bored file clerk in Detroit named Lorraine(?) sent me photocopies of my FBARs. I still have them in a safe somewhere. (I still print them every year too.) Think of it this way. You’re thinking about it. You’re farther ahead than probably 50% of people out there.

(insert standard disclaimer that I am neither a lawyer nor your tax advisor and YMMV. I have not actually done this with GV funds; I’ve just read enough of all of the paperwork to get a pretty good idea of how all this is structured based on previous experience.)

4

I understand your thinking here, but I personally believe there is no question the GV account is a “financial account” under the law. Until the money is invested into real estate, it is basically just money sitting in a bank account for the benefit of the investor.

The only question in my mind is whether the GV investor meets the definition of having a “financial interest”. It really seems intended to exclude anyone who owns less than 50% of an interest through a company or other entity. In most or all cases, the GV investor will only have a 5-10% interest at most so it does not seem to meet the definition and would not be reportable. Ultimately, I think your conclusion is probably correct but for a different reason. But obviously make your own determination. This is not intended to be legal or tax advice. Consult your own lawyer or professional.

5

We can agree to disagree.

It is money in the bank - but it’s not money in an account in your name. Once you give it to the fund, you’ve lost control of it; you can’t tell BC what to do with the money or transfer it to some third party or something else - you traded your money for shares of the fund. Sure it’s to your benefit but in the same way that owning shares of EdP would be. The only difference here is that BC is more transparent to you as the investor than EdP; but if you had the same relative scale of ownership of EdP that you would of BC, you’d be calling EdP investor relations and having the same conversations, and start being listened to in the same way. Think it through. How different is it, really?

(Hence the bit about percentages of ownership. If you controlled the fund it’d be different. But even then it’d fall under CFC rules not FBAR.)

It might help if you dig through sec954(? might be 953) where there is a much more explicit definition of what a “foreign financial institution” is. The fund is not a “mutual fund or similar pooled fund” because it doesn’t have regular redemptions or NAV calculations - once a year doesn’t cut it. It’s not insurance, or a bank.

of course all this is kind of moot, because:

o Example: Foreign hedge funds and private equity funds are not reportable on the FBAR. The FBAR regulations issued by FinCEN on February 24, 2011 do not require the reporting of these funds at this time.

https://www.irs.gov/pub/irs-utl/irsfbarreferenceguide.pdf

These are clearly private equity funds. (A hedge fund undertakes trading activity to make money. A PE fund buys stuff in the hopes of appreciation.) Therefore not reportable. But the depository account clearly is a financial account at a FFI and reportable.

It might be possible to do direct subscriptions of a fund without the depository account and have those not be reportable. That’s a whole other thing and I can’t speak to it without more consideration. Not that relevant here though.

6

I am not sure there really is much disagreement. We are just talking about different ways of reaching the same conclusion.

You are correct that the reference guide excludes foreign private equity funds by example from the definition of a “financial account”. This is curious because the “example” directly contradicts the definition so I would consider it the opposite of an example but whatever. Based on your input, I have corrected the original comment I made on this.

Example: Foreign hedge funds and private equity funds are not reportable on the FBAR. The FBAR
regulations issued by FinCEN on February 24, 2011 do not require the reporting of these funds at this time.

7

I guess I’d say that it doesn’t contradict so much as provide an exclusionary example - which ok is semantics :slight_smile: “foreign financial institution” is not defined in this document - there are a bunch of examples, a “typically” and “includes”, but there isn’t a strict definition. There is a definition in sec954 or sec953 somewhere for the purposes of tax law, and when I dug at it, I more or less concluded that a PE fund like BC is NOT a FFI, however much it might seem like it should be on the surface. That said, that’s not necessarily the relevant definition either since FBAR is covered under the Bank Secrecy Act not tax law and I’ve spent zero time reading BSA; I’ve had enough guidance for my specific situation that I haven’t needed to dig further into it, and I haven’t committed to a GV fund to have all the details to be able to make a judgment for myself or need to push the speed-dial.

(I’m quirky about these things. Even if I have the speed dial, I want to read the law for myself. It’s how I’m wired. That does not qualify me to be anyone’s lawyer or advisor besides my own.)

Anyway. Thanks for doing a summary for people, good idea.

1 Like
8

I agree. I prefer to process and run the analysis myself instead of relying only on experts. It is not exactly straight-forward.

Going through this “out loud” helps me to process it and vetting among multiple people also improves the analysis. Thank you for your input to make the summary better :slight_smile:

1 Like
9

Thanks for this!

11

Curious why you’re reporting the zero balance. Is it because you have to report on other accounts anyway? In my experiences reporting to the US Gov’t, once you start, you’re pretty much locked in. I had a situation where my 401k custodian said I needed to file an annual report. After 2-3 years, I found out I didn’t until it had reached a high enough balance, but because I had been filing, I needed to continue to do so. The financial penalty for not filing would have been a sizeable chunk of the balance at the time and more intended for bigger companies rather than a small business.

12

@mmd Because technically it is a signature authority over a financial account even if the balance is 0. The total of all my accounts exceeds $10,000. I agree it is ridiculous but to me the effort to add this information to the FBAR filing is trivial but it could avoid the inference that I am trying to hide something. As far as I can tell, after you prepare the report the first time, the next year is even easier because all the information is already there so you are just copying information and updating balances. If I close the account next year, I would not continue to report that account if the account no longer exists.

The other critical issue is that if you determine that you are not reporting a GV investment fund on the FBAR based on the regulations and if your other accounts are less than $10,000 you may be able avoid any FBAR reporting in future years. (It is very unlikely you could ever avoid reporting in the first year due to money transfers) I am not giving any type of opinion or statement here in that regard. You would need to make that determination for yourself or with your legal/tax professionals.

13

Its that time of year again. I struggle again with the obligation to report WIse foreign currency account balances on Form 114. I continue to believe that Wise balances over 10k must be reported. Unfortunately, there is no definitive published answer from Wise. (In fact, searching for “FBAR” on the wise help portal returns nothing. ) I know some others on NG had different opinions on this. To each their own. I did a quick Google sanity check this year and found this which supports my conclusion from last season:

If I hold pesos within a Wise account, do I have to file an FBAR? - TexMexExpats

Wise is NOT transparent about their processes at all.
There are some “hints” that for US customers they use US banks but they don’t come out and say this. If you have a debit card it is issued on a US bank so there is that. And you can draw on that card in Euros.

On the other hand, if the money were in a US bank it seems they would be touting the FDIC protection (they don’t).

But given the simplicity in filing the FBAR report, it almost weighs in favor of just filing it given the conflicting information.

14

I would say no.

You have a relationship with Wise in the US. That’s a US entity. They claim to be licensed and registered with FinCEN, and in some states, through a bank.

Which means all your transactions are being reported to FinCEN already anyway.

This is IMO about the same as having an IB account. You can hold EUR balances and you send wires through European entities and blabla but you don’t have to report anything about them because you are a US customer of a US entity. You don’t have a direct relationship with the European banks that your balances are being held in.

If you had an actual relationship with an actual offshore entity, then sure. But you don’t. The only relationship you have is that with Wise US. I would assume that to be the case, that is - I’d have to see the actual paperwork but I don’t have a Wise account and have no interest in opening one just for the sake of reading the contracts, but that is what makes sense to me.

Other evidence: basically, there is no legal way any offshore entity is going to be allowed to advertise services to US citizens en-masse like this without everything already being logged and reported five ways to Sunday. Think about it. What non-US bank or financial entity is allowed to advertise services in the US directly targeting US clients?

That there is an IBAN IMO doesn’t in and of itself mean anything. It’s probably just a correspondent account and not actually in your name.

YMMV and worth exactly what you paid for the advice, $0.00.

15

I’m struggling with Wise too. Last year I tried to open an additional Euro-denominated account for reasons that seemed good at the time. Wise repeatedly refused, with no explanation, to accept my verification photo even though it exactly matched their specifications. Now I am stuck with a frozen Wise account on my home screen with a 0€ balance, and I can’t get the account information to complete my FATCA and FBAR.

@jb4422’s points are logical, but I fear that this is not a realm of logic and cooperation so much as a net of sadistic entrapment and destruction–being bankrupted and ruined, and perhaps imprisoned for life, if you make the slightest innocent technical error. Perhaps their bark is worse than their bite, but I will carry on assuming the worst and prostrating myself through whatever humiliations are required to ward off punishment.

One point I’ll add in favor of my “exacting, unforgiving demands for perfection” interpretation is this: we’re still required to file FBAR and FATCA for all of our bank accounts in Western European countries that comply with all of the KYC/AML discipline and CRS reporting rituals. I have a hard time believing that the IRS or FinCEN would say “hey that’s OK, we already heard about it through the grapevine” if I didn’t report my highly compliant EU bank accounts.

This weekend I took another trip through the spin cycle and wrote to Wise customer support, providing yet another intrusive identification “selfie” and explaining the situation. If that doesn’t resolve things, I’ll file a complaint with the Consumer Financial Protection Bureau. I hold the CFPB in high esteem; they promptly solved my ordeal with a credit card company after I had gone in circles for 18 months.

16

That is the point. In those cases, you have a relationship with some entity that is not US-based. It doesn’t matter if they have branches in the US, it’s whether the counterparty whose name is on the contract/account-opening-form is based in the US or not. The FBAR instructions themselves state this in so many words. It’s also stated that correspondent/nostro accounts are not reportable.

Ok, so I got sucked in, I dug at it a little. Don’t ask me why I do this. Anyway, it seems clear as day to me what is going on here.

Wise’s description of themselves pretty much says all you need to know:

As does the T&C that you agreed to when you made the account:

"The specified bank account details that we provide to you in order for you to receive funds from third parties are for accounts held by Wise and its affiliates (and we will credit your Borderless Account, which is held by us, upon receipt of such funds), and are not for a bank account held by you. Value held as a balance in your Borderless Account represents an unsecured claim against Wise and is not insured by the Federal Deposit Insurance Corporation (FDIC) or any other deposit protection scheme. "

You never have an account in the other country - or anywhere at all, really. You give Wise money. They do stuff on your behalf. The foreign bank has no idea who you are. Those IBANs aren’t yours. Your money isn’t even yours anymore when you give it to them - it’s theirs. They segregate it from their own operational money, but it still isn’t yours, it’s a book entry. You’re just hoping they’ll give it back to you. Granted, you do have legal protections, through the banking act of your state of residence. NY has an insurance fund that covers EMIs and some other stuff, from my glance through NYS Banking Law13-B, so it’s not a free-for-all, but still. The Mastercard is yours, but it’s issued by a US bank, so again nothing to report. I quite imagine it’s really a USD card, just with zero foreign currency fees since Wise is dealing with it.

The way to think about them is that… they’re Western Union. You give money to Western Union to send to Jose in Mexico. Well, until the time Jose picks up the money, the money’s a book entry on WU’s books. It’s not “yours” any more, and it’s not in a bank, it’s being held by a duly registered electronic money transfer institution, and that moneygram you sent Jose is just that, it’s a claim against WU. Wise just adds plumbing that connects them into the banking system.

So there’s no FBAR to file because there’s no actual account with any foreign institution. Your entire dealings are with the Wise US entity and the Community Federal Savings Bank (that issues the Mastercard).

As to Wise being unreliable and/or providing FaceBook levels of customer service, well, that’s a whole other unrelated matter.

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17

Question on this.

  1. I think the bank account itself is definitely reportable as a foreign financial account as a bank account.
  2. What I’m not sure about is do I need to submit a separate entry (same acct number at same bank for what it’s worth) as a securities account to cover the custodial aspect, or if this piece is not necessary because it’s a private equity fund and flows from the fund are not discretionary on my part.
  3. Related to #2, should I consider reporting it anyway even if not required because presumably there would be no penalty for reporting this even if it was not required, whereas not reporting if required could result in a penalty?

Thanks!

18
  1. of course.
  2. if it’s the same account number, then IMO no. The point is to indicate that you have a relationship with the entity. If nothing else, you can ask the bank how it is being reported. That it is a private equity fund is irrelevant though; it’s a security. That it is not discretionary is also irrelevant, it’s a financial instrument held through a reportable entity. I would note that practically all securities accounts have a cash component.
  3. If that makes you comfortable. I would follow the account number. If you don’t have a separate account number, then what is the other line for?

YMMV and I am not a tax advisor.

19

So I went to the usual place https://fiscaldata.treasury.gov/datasets/treasury-reporting-rates-exchange/treasury-reporting-rates-of-exchange to look up exchange rates for FBAR reporting, but it looks like the most recent data for Euros is from 12/31/2021.

I’ve reported it to the site, but has anybody else run into this issue? I know I’m not strictly required to use their rates, but I imagine it’d be easier to defend if necessary.

20

They are updated. You are looking :eyes: n the wrong place. Google it

21

Ugh, the link is correct. It’s just called “Euro Zone” instead of being broken out by country as before. :person_facepalming: