FBAR and FATCA Basic Regulations

Jan 1, 2014

FBAR / FATCA General Information

As a U.S. citizen, you may have to file an annual “Report of Foreign Bank and Financial Accounts” (FBAR) with the U.S. Treasury Department.  Existence of such an account or accounts must be reported on schedule B of IRS form 1040, as well as interest earned from such accounts. Keep a copy of your FBAR, quarterly bank reports, and yearly reports of all other financial holdings as detailed below.

The FBAR is not filed with the federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR.

  • Who must file? ny U.S. person who has a financial interest or signature authority over one or more foreign bank account or securities account which had an aggregate value of $10,000 at any time during the year. This includes individuals, U.S. branches of foreign companies, and U.S. parents of foreign subsidiaries.
  • When? By June 30th.  That means if you had the equivalent of $10,000 (in aggregate) in a foreign bank or securities account in the current year, you have to file the FBAR prior to June 30 of the following year.

A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000 per violation. If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed. A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50 percent of the balance of the account at the time of the violation. Willful violations may also be subject to criminal penalties.

In addition, beginning in tax year 2011, additional reporting requirements exist to comply with the Foreign Account Tax Compliance Act (FATCA). Failure to report foreign financial assets on Form 8938 will result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification).  Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.

FBAR/FATCA Documentation

For your bank accounts, please send statements for all 12 months of banking activity for the year.  For other financial accounts, please send the yearly report for each account.  Please fax, email, or send photocopies of the statements and keep the original statements with your financial records.  Accounts that must be reported on your FBAR are listed below, but might include other financial accounts in your name.  Please see the frequently asked questions report, or contact your agent for clarification.  If there are any questions, then we recommend that you send us the report of the account.

  • Bank accounts – checking, savings, other (postal account, savings account with insurance company, etc)
  • Pension accounts – such as kupat gemel, keren pensia, etc
  • Provident accounts – such as keren hishtalmut
  • Life insurance
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Many taxpayers receive identity verification notices from the IRS, and in most cases, the process is straightforward and can be resolved without much difficulty.

You have the following options to verify your identity:

Option 1: Verify through the IRS using your ID.Me account

 

Option 2: Use the IRS Document Upload Tool

    • Please note when they ask for the access code answer "no" and put in the notice/letter type 5447C

    • Alternatively, we can upload the documents on your behalf. (Please note additional fees apply.)

For both options 1 and 2:

    1. Allow at least 30 days to process.
    2. You can then check your status on IRS Where's My Refund or request that we pull your transcript.

    Option 3: Call the IRS

      1. Phone number: 1-267-941-1083

      1. When calling the IRS please note that there could be long wait times. We recommend the best time to call is as close to 1PM Israel time as possible, when the lines first open.

    When speaking with the IRS agent:

      • Let them know you are calling in response to a Letter 5447C letter for tax year 202x.

      • Provide the control number as it appears on the first page of the letter.

      • Be prepared to answer any question they ask from the first 2 pages on both tax returns, including:

          • complete address

          • filing status (Head of Household /Married Filing Separately / Married Filing Joint/ Single)

          • refund amount.

      • If you are unsure of an answer you may ask the agent where it can be found on the return.

      • Know the dates of birth for you and the children on the return

      • Know your mother's maiden name

      • If they ask about W-2 income, tell them since you live outside of the US your income isn’t reported on a W-2, but rather the equivalent form 106 instead.

    They hopefully will not ask any more financial questions.

    If your identity is successfully verified during the call, the IRS will typically inform you immediately. Your refund should then be released within approximately 6-9 weeks.

    Documents Required in All Cases

    Regardless of the verification method you choose, you will need:

      • a copy of the 5447C letter you received

      • the first 2 actual 1040 pages of your 202x and 202x tax returns

    Additional Documents for ID.me or Document Upload Verification

    If you are verifying online through ID.me or using the IRS Document Upload Tool, you will also need:

    Two clear copies of acceptable identification, as listed in the IRS letter (for example passport and license).