Double Counting FBAR Values: A Common Query from Expats

In this week’s Real Tax Questions From Real Expats, we're exploring how transferring funds between foreign bank accounts affects FBAR reporting obligations.

The Scenario

A US citizen living abroad with two non-US bank accounts transferred $9,000 from one account to another. The question is whether this movement of funds crosses the FBAR threshold of $10,000.

FBAR Filing Requirement: General Rules

FBAR (Form 114) reporting is mandatory when the aggregate balance of all non-US accounts exceeds $10,000 at any point during the year. The key factors are:

• Highest Balance: Reporting is based on the highest account balance at any time during the year.
• Aggregate Balances: Summing up the highest balances of all foreign accounts.
• Threshold: The aggregate exceeding $10,000 necessitates FBAR filing, using the year-end exchange rate.

Does Transferring Funds Trigger Reporting?

Transferring funds between accounts can lead to double counting. In this case, the individual's aggregate reaches $18,000 due to the transfer, crossing the FBAR threshold. This results in a reporting requirement, despite the actual amount being less than $10,000.

Implications and Good News

While this triggers a reporting obligation, there's no tax due for FBAR filing. However, non-compliance can attract penalties up to $10,000 per year.

It's crucial for US expats to monitor their non-US bank account balances closely to ensure compliance.

For assistance with international tax issues and navigating US tax implications abroad, contact McGowin Tax LLC.