The end of the year is quickly approaching. Although foreign bank accounts don’t have to be reported for a few more months, the year end is a good time to start getting one’s financial house in order. (FBAR reports are generally due on June 30th.)
Earlier this summer, the Treasury Department clarified the FBAR filing responsibility of kids with foreign accounts. The guidance itself was quite simple:
Responsibility for Child’s FBAR
Generally, a child is responsible for filing his or her own FBAR report. If a child cannot file his or her own FBAR for any reason, such as age, the child’s parent, guardian, or other legally responsible person must file it for the child.
Signing the child’s FBAR
If the child cannot sign his or her FBAR, a parent or guardian must electronically sign the child’s FBAR. In item 45 Filer Title enter “Parent/Guardian filing for child.
An FBAR, short for Report of Foreign Bank and Financial Accounts, must be filed whenever one owns, controls or has signature authority in an account worth more than $10,000 (U.S. dollars). Own or control multiple accounts? The FBAR regulations look to the aggregate value of all the accounts.
Separate from the FBAR forms are the foreign reporting requirements found on the income tax return and IRS Form 8938. The reporting thresholds are a bit different but once again minors are required to comply.
Although we are not aware of any IRS penalty cases involving kids, the civil penalties for unfiled FBARs are huge. Penalties up to the greater of $100,000 or 50% of the highest account balance are common.
As we approach the tax filing season, remember that everyone that has interest in a reportable foreign account must file an FBAR. Remember too that the FBAR requirements extend well beyond offshore bank accounts and may include foreign brokerage accounts, certain annuities, cash value life insurance and precious metal accounts.