FBAR adventures of a kid hockey team treasurer

The Foreign Bank Account Report isn’t just about bank accounts

Photo by April Walker on Unsplash

Canadian cliche

For many years my youngest played hockey in the city recreation leagues.  Kid hockey is a big part of many Canadian families’ winter life, and parents support their child’s team in many ways.  

I wanted to do my part, but as an American transplant my non-existent skating skills ruled out coaching.  However, I could balance a checkbook (chequebook in Canadian), so I volunteered to be the team treasurer for the year.  I only learned later that I would continue as treasurer until I die or my son quit hockey. 

Yearly expenses were about $3K, so I collected parent payments and paid team bills, mostly for ice rink rentals.  I had no idea that the US government would get involved, which brings me to FBARs.

FBAR review

Are you an American with your name on a non-US account that smells of money?  You may need to report it on an FBAR.

FBAR is short for Foreign Bank Account Report, a required US Treasury form on which you list info about your foreign financial accounts – institutions, accounts, and amounts.

It’s tempting to ignore the FBAR.  Don’t!  Big penalties can result from failing to file a timely report about your accounts and their contents. 

Your chance of being caught is thought to be low.  However, you take a very expensive risk by not filing if the IRS is already acquainted with you.

If you aren’t known to the IRS or your citizenship status is unclear, consult a lawyer with expertise on US taxation and citizenship before taking any action on an FBAR.  That’s because filing will enter you into the US tax system with many long-term consequences.  

The FBAR concerns itself only with assets in foreign (non-US) accounts.  

What makes an account foreign?

The word foreign in FBAR is not about where you live.  It’s about where your money in accounts lives. 

For example, an account of a US bank in London is ‘foreign’.  An account in a branch of a German bank in Miami is not ‘foreign’.  An account at any institution located outside of the US is foreign unless it’s in a US military banking facility.

Americans living abroad usually have accounts where they live, so their accounts qualify for reporting on FBARs.  

Some of your accounts can be foreign while others are not.  An American living abroad could have foreign accounts while maintaining an account in the US.  The foreign accounts would be FBAR reportable, but their US account would not be.

What types of accounts count?

The FBAR is about a lot more than savings and checking accounts. Here’s a more complete list of FBAR reportable accounts:  

• Bank accounts, e.g. savings, checking, and time deposits;

• Securities accounts such as brokerage accounts;

• Commodity futures or options accounts;

• Insurance policies with a cash value, e.g. a whole life insurance policy;

• Mutual funds or pooled funds with a net asset value determination and redemptions;

• Canadian RRSP and TFSA accounts;

• Mexican Fondos para el Retiro and AFORE accounts;

• Account with someone who provides financial services;

• Accounts for which you have signing authority – even if it’s not your money;

• Trust account in which you have > 50% beneficial interest in the trust’s income or assets;

• Account closed during the FBAR year (make a note of the closure date); and

• Inactive accounts, which are unused but still open (close them).

When in doubt, include.  There’s no penalty for mistakenly reporting an unnecessary account, but there can be a penalty for omitting a required account.

Two types of accounts deserve some extra attention, joint accounts and those for which you have signing authority.

Joint accounts

Accounts you share with others must be reported even if the other account holder isn’t an American. Your non-American spouse may well be annoyed about sharing their financial life with Uncle Sam.  They’ll probably be even more than annoyed by a big FBAR penalty for not reporting, however.

The overall maximum balance in a shared account must be listed on the FBAR even if your portion is small. This means that joint accounts can count heavily towards the $10K filing threshold that triggers your need to file.

Signing authority

This brings me back to hockey.  Even if you’re not a hockey team treasurer, you may hold a position in an organization or business that involves signature authority over financial accounts. 

A critical implication is that your organization's bank account details and maximum balance must be shared with Uncle Sam via your FBAR.  Many companies and organizations will not tolerate that, so a career in finance could be derailed. 

When I began my hockey treasurer career, I didn’t know that the team account was FBAR reportable.  Later, when I learned the awful truth, I didn’t confess to my fellow parents.  It seemed too complicated to explain, so I just continued treasuring.  I did, however, report the team account on my FBAR. 

Take-home message

The innocuous looking FBAR is about a lot more than checking and savings accounts.  Many types of accounts must be reported.  Some of them can spark conflict between spouses and alarm foreign employers and organizations.

Don’t ignore the FBAR or underestimate its capacity to complicate your expat life.

In my next post, I’ll describe some ways to stay under the $10K filing threshold.  My suggestions won’t cure the FBAR’s awfulness, but they might help a bit.  

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