FBAR Requirements For US Retirement (IRA) and Foreign Retirement
With theUS governmentstill moving full steam ahead on enforcing matters involvingforeign bank and financial account reporting(FBAR), it is important for taxpayers who may have an FBAR filing requirement to have a basic understanding of what types of foreign financial assets are reportable onFinCEN Form 114(“FBAR”). One common type of foreign account is a foreign pension/retirement account. For example, a taxpayer may have anAustralian Superannuation, aSingaporean CPFor aHong Kong MPF. Since oftentimes the value of these pension/retirement accounts may be substantial, it is important to understand whether or not these types of retirement accounts are reportable –– as well as whether US-based retirement accounts such as IRAs (that contain foreign assets) are reportable as well. Let’s go through the basics of FBAR reporting for US retirement and foreign retirement accounts.
Foreign Retirement Accounts Are Reportable
The FBAR instructions and the updatedIRS Publication 5569are straightforward when it comes to reporting foreign pension accounts. When a person has a foreign pension account (such as the type of accounts indicated above), then those types of retirement accounts are considered financial accounts that are required to be disclosed on the annual FBAR.
As provided by the IRS:
Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican Administradoras de Fondos para el Retiro (AFORE) are foreign financial accounts reportable on the FBAR.
US Retirement Accounts With Foreign Accounts
This is where it can get a bit complicated, due to some of the terminology used in this area of tax law. In general, a qualified retirement account such as an IRA is not reportable for FBAR purposes. This is true, even if the IRA contains foreign financial account as a pooled fund. It is also important to note that a ‘financial account’ is not limited to bank accounts and can include pooled funds such as ETFs or mutual funds. Thus, if a person owns a foreign mutual fund outside of the US pension plan, then that type of account is reportable, but if the pooled fund is held within a qualified US retirement plan such as an IRA, then it is not reportable. In other words, as long as the foreign account or fund is held within a qualified retirement plan, then the specific foreign asset contained in the qualified plan does not need to be segregated and reported on the FBAR.
As provided by the IRS:
The following persons are excepted from the FBAR filing requirement:
- Individual Retirement Account (IRA) owners and beneficiaries. An owner or beneficiary of an IRA located in the U.S. doesn’t need to report a foreign financial account held by or on behalf of the IRA.
- Participants in and beneficiaries of tax-qualified retirement plans. A participant in or beneficiary of a retirement plan described in Sections 401(a), 403(a), or 403(b) of Title 26 of the United States Code (Internal Revenue Code) doesn’t need to report a foreign financial account held by or on behalf of the retirement plan.
Missed Reporting Retirement Plan on FBAR?
If you missed reporting a foreign retirement plan on the annual FBAR, there are very safe methods for getting into compliance depending on your specific facts and circ*mstances. This type of reporting of late disclosure is referred to asOffshore Amnestyand you should speak with aBoard-Certified Tax Law Specialistwho specializesexclusivelyin this area of tax law to get an understanding of what your options are.
I am an expert in international tax law with a focus on FBAR (Foreign Bank and Financial Account Reporting) requirements for US taxpayers. I possess a deep understanding of the complexities surrounding the reporting of foreign financial assets, especially in the context of US retirement accounts and foreign retirement accounts.
In the provided article, the author discusses the importance of understanding FBAR reporting requirements for both US-based retirement accounts and foreign retirement accounts. The main concepts covered include:
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FBAR Reporting for Foreign Retirement Accounts: The article emphasizes the necessity for taxpayers with foreign pension/retirement accounts, such as Australian Superannuation, Singaporean CPF, or Hong Kong MPF, to be aware of their FBAR filing obligations. The FBAR instructions and IRS Publication 5569 clearly state that foreign pension accounts fall under the category of financial accounts that must be disclosed annually on the FBAR.
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Types of Foreign Retirement Accounts Included: The IRS explicitly mentions specific foreign retirement accounts that are reportable on the FBAR. Examples include Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro), and Mexican Administradoras de Fondos para el Retiro (AFORE).
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US Retirement Accounts with Foreign Assets: The article delves into the complexities of reporting US-based retirement accounts that contain foreign assets. While a qualified retirement account like an IRA is generally not reportable for FBAR purposes, there is a distinction made between accounts held within the US and those held abroad. The key point is that foreign accounts or funds held within a qualified US retirement plan, such as an IRA, are exempt from FBAR reporting.
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Exceptions to FBAR Filing Requirement: The IRS provides exceptions to the FBAR filing requirement for certain individuals, including owners and beneficiaries of Individual Retirement Accounts (IRAs) and participants/beneficiaries of tax-qualified retirement plans described in Sections 401(a), 403(a), or 403(b) of the Internal Revenue Code.
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Offshore Amnesty for Missed Reporting: The article acknowledges that individuals who missed reporting a foreign retirement plan on the annual FBAR have options for getting into compliance. It introduces the concept of "Offshore Amnesty" and recommends consulting with a Board-Certified Tax Law Specialist specializing exclusively in this area to explore available options based on specific facts and circ*mstances.
In conclusion, the article provides valuable insights into the intricate landscape of FBAR reporting for both US and foreign retirement accounts, offering guidance on compliance and potential remedies for missed reporting.
