Note: this article was originally published on 15 April 2015. All of the information and links provided below have been rechecked and are still valid. The FBAR filings are now an annual tradition as is the republishing of this article. Hopefully you read this last year and are now an FBAR Ninja™. Hopefully.
Disclaimer: this post assumes you know whether or not you need to file an FBAR. It provides no financial or tax advice. It’s simply one man’s quest to minimize the time needed to manage and file the yearly FBAR.
One of the great joys of being an American living abroad is the intrusive and draconian tax reporting obligations. And by joy I mean a monumental annoyance tinged with profound sadness. But since I’d like to avoid having my assets seized and spending time in a federal prison I play the game and file my FBAR every year by June 30th. In fact, I just filed mine this week when a question came up in the LiL Facebook page about FBAR filing. I thought I would share my workflow for filing promptly and with minimal admin time required. The FBAR filing is something you can do yourself and save you some money as opposed to letting your accountant do it. Let’s dive in.
What is FBAR?
Without going into too much detail, if you are a US citizen and the total sum of your foreign bank accounts at any time during the previous year exceeded $10,000 then you need to file a form reporting the balances of each account every year. Don’t take my word for it, read the fine print yourself to see if you ‘qualify’.
Once you know you need to file then it’s about collecting all the information and learning how to fill in the form. Thankfully it’s not very intimidating once you’ve done it for the first time. After that you can look forward to dedicating just a few hours a year.
Things you’ll need to get started
- Statements from any and all accounts (whether they are monthly or quarterly or yearly doesn’t matter)
- The official IRS currency exchange rate list
- This handy google spreadsheet I put together as a template for you
The Spreadsheet
Once you open the google spreadsheet you can click File/Download As/Microsoft Excel from the menu to create a copy of your own to use going forward. Using the spreadsheet is very straightforward. Each row contains the information about a single bank account. Besides entering the basic information (which makes filling in the form easier to have it in one place) your main task is to enter the balances month by month according to your statements. Don’t worry, it doesn’t matter if you don’t get monthly statements. If you get quarterly statements just enter them in the proper month. Column H (Highest Value) then automatically calculates the highest value for any of the twelve months in that row. And the USD Value is calculated based on the Highest Value and the Rate (which you get from the IRS page linked above and will need to enter in the Rate column for each account). The USD Value is the only figure that matters once you move on to the actual filing
When you’ve entered all the balances for each account and have your USD Values then you are ready to file.
On to filing (or, how I learned to love websites designed by government contractors who provided the lowest bid).
Electronic filing is the only way to file an FBAR. The steps are as follows:
- You’ll need to first apply to become a BSA E-Filer (get started here).
- The other resource you’ll need at the beginning is to set up your computer/browser correctly to use adobe reader and then on Page 8 start the instructions for getting the proper form and doing the filing. FBAR guide
Once you get to the actual form you’ll find it is fairly straightforward. The first few pages ask for basic information. On page 3 starts the actual reporting. For each account you enter the maximum account value (the Highest Value from the spreadhseet) while also providing the name and address of the bank. Click the + button in the header to add a new account. You only file one PDF document for all accounts, not a separate document for each account.
The trick is to set aside enough time to go through the steps the first time without getting frustrated. Trust me, after the first year you’ll be able to manage your yearly FBAR requirements with only a few hours a year.
