The Foreign Bank and Financial Accounts (FBAR) is a report that must be filed with the Financial Crimes Enforcement Network (FinCEN) by certain individuals and businesses that have financial interests in or signature authority over foreign financial accounts. Failure to comply with FBAR reporting requirements can result in severe penalties, making it crucial for those who meet the reporting criteria to understand their obligations.
One critical aspect of FBAR reporting is the requirement to make an FBP declaration. In this blog post, we’ll discuss what FBP declarations are and provide a guide for individuals and businesses on how to properly file them.
What is an FBP Declaration?
An FBP declaration is a form that must be completed and submitted to the U.S. Department of the Treasury by individuals or businesses who are required to file an FBAR report but cannot do so because their foreign financial institution or service provider does not participate in the FBAR e-filing system. FBP declarations are used to declare the filer’s FBAR report for a particular tax year.
Who Needs to File an FBP Declaration?
If you have a financial interest in or signature authority over foreign financial accounts and your foreign financial institution or service provider does not participate in the FBAR e-filing system, you must file an FBP declaration if you meet the FBAR reporting requirements. This includes individuals who are U.S. citizens or residents, as well as businesses that are incorporated or organized in the United States, including partnerships, corporations, and limited liability companies.
How to File an FBP Declaration?
Filing an FBP declaration is a relatively straightforward process. Here’s what you need to do:
- Download the FBP form from the FinCEN website.
- Complete the FBP form for the relevant tax year. The form requires basic information about the filer, the foreign financial institution, and the foreign financial account.
- Sign and date the FBP form.
- Submit the FBP form to the Department of the Treasury at the address provided on the form.
It’s important to note that filing an FBP declaration does not excuse a filer from filing an FBAR report. If your foreign financial institution or service provider does not participate in the FBAR e-filing system, you must file both an FBP declaration and an FBAR report to comply with the reporting requirements.
Penalties for Non-Compliance
Failure to comply with FBAR reporting requirements can result in severe penalties. For willful violations, penalties can be as high as the greater of $100,000 or 50 percent of the account balance at the time of the violation. Non-willful violations can result in penalties of up to $10,000 per violation. Filing an FBP declaration can help to mitigate the risk of non-compliance, but it is still essential to understand all of the FBAR reporting requirements and to ensure that you are in full compliance.
FBP declarations play a crucial role in ensuring that individuals and businesses are in compliance with FBAR reporting requirements. If you are unsure whether you need to file an FBAR report or an FBP declaration, it’s essential to seek professional advice to avoid the risk of penalties.
It’s important to note that the FBAR reporting requirements are separate from other tax reporting requirements, such as the requirement to report foreign income on your tax return. Failure to comply with FBAR reporting requirements can result in severe penalties, and the IRS takes these requirements very seriously.
If you have previously failed to file an FBAR report or an FBP declaration, it’s important to take corrective action as soon as possible. The IRS has programs in place, such as the Delinquent FBAR Submission Procedures and the Streamlined Filing Compliance Procedures, that can help you come into compliance without facing severe penalties.
In addition to the FBP declaration, there are other reporting requirements that individuals and businesses with foreign financial accounts must be aware of. These include the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).
FATCA is a federal law that requires foreign financial institutions to report information about their U.S. account holders to the IRS. It also requires U.S. taxpayers to report their foreign financial accounts on their tax returns.
The CRS is a global standard for the automatic exchange of financial account information between tax authorities. The CRS requires foreign financial institutions to report information about their non-resident account holders to their home country tax authorities, which will then share that information with the tax authorities of the account holders’ countries of residence.
It’s important to understand these reporting requirements and to ensure that you are in compliance. Failure to comply with these requirements can result in significant penalties and legal consequences.
If you are unsure about your reporting requirements or how to file an FBAR report or FBP declaration, it’s important to seek professional advice. A qualified tax professional can help you understand your reporting obligations and ensure that you are in compliance with all applicable laws and regulations.
Conclusion
FBP declarations are an essential tool for individuals and businesses who have foreign financial accounts but cannot file an FBAR report electronically due to the lack of participation of their foreign financial institution or service provider. Filing an FBP declaration is a simple process that can help to ensure compliance with FBAR reporting requirements and mitigate the risk of penalties. It is crucial to understand all of the FBAR reporting requirements and to seek professional advice if you have any questions or concerns. Other Useful Blogs: Maximize Your Tax Deductions
Frequently Asked Questions (FAQ’s)
Q1.) What is an FBP declaration?
An FBP declaration is a report that individuals and businesses with foreign financial accounts must file with the U.S. Department of Treasury. The report is required under the Foreign Bank and Financial Accounts (FBAR) regulations.
Q2.) Who needs to file an FBP declaration?
Anyone who is a U.S. person and has financial accounts in foreign countries that exceed certain thresholds during the year is required to file an FBP declaration.
Q3.) How do I file an FBP declaration?
You can file an FBP declaration electronically through the BSA E-Filing System. Paper forms are also available.
Q4.) Is an FBP declaration the same as an FBAR report?
Yes, an FBP declaration is the same as an FBAR report. The terms are used interchangeably.
Q5.) When is the deadline for filing an FBP declaration?
The deadline for filing an FBP declaration is April 15 of each year. However, the deadline may be extended to October 15 in certain circumstances.
Q6.) What information do I need to include in my FBP declaration?
You need to include information about your foreign financial accounts, including the account number, name of the financial institution, and the maximum account value during the year.
Q7.) Can I file my FBP declaration online?
Yes, you can file your FBP declaration electronically through the BSA E-Filing System.
Q8.) What are the penalties for not filing an FBP declaration?
Penalties for not filing an FBP declaration can be significant, ranging from a non-willful penalty of up to $12,921 to a willful penalty of the greater of $129,210 or 50% of the account balance.
Q9.) Can I file an FBP declaration if I have already filed an FBAR report?
Yes, you can file an FBP declaration even if you have already filed an FBAR report. The FBP declaration is a separate reporting requirement.
Q10.) Are there any exceptions to the FBP declaration filing requirement?
There are certain exceptions to the FBP declaration filing requirement, such as for certain foreign financial accounts held by government entities or international financial institutions. It’s important to seek professional advice to determine whether you are exempt from the reporting requirement.
