The U.S. Foreign Bank and Financial Accounts Report (FBAR) program requires U.S. citizens and residents (for U.S. tax purposes) to report accounts held at foreign financial institutions if certain criteria are met. It should be noted that the FBAR regulations also apply to minors.
The FBAR reporting requirement arises when the total value of accounts held at a “foreign” financial institution from the perspective of the U.S., such as Japan, exceeds US$10,000 at any given point in a given year. This amount is totaled regardless of the type or number of accounts. If a minor meets this criterion, an FBAR must be filed regardless of whether or not a tax return is filed.
In particular, an FBAR may be required if a parent opens an account in the child’s name or if the minor holds a foreign account as a gift or inheritance from a parent or grandparent. Whether the account is held by a minor or controlled by a parent or guardian, the responsibility for filing lies with the account holder. Eligible financial accounts include not only bank accounts, but also securities accounts, insurance accounts, and several other types of accounts.
FBAR returns must be filed by April 15 of each year, and returns are filed electronically through the FinCEN website. Late or non-filed returns can result in serious fines and penalties. A process is provided to request a reduction in the penalty if the applicant wishes to correct an unfiled return.
The program calls for transparency and accountability regarding the offshore financial accounts of all U.S. citizens and residents under U.S. tax law, including minors. U.S. permanent residents who do not reside in the U.S., permanent residents whose green cards have expired but have not completed the formal tax law abandoning process, and U.S. citizens who do not reside in the U.S. are also eligible.
It is important that parents of minors with FBAR-eligible accounts be aware of the FBAR requirements and seek professional advice if necessary.
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