FBAR Filing Requirements

You are required to complete the FBAR form if you have financial interest in and/or signatory authority for foreign financial accounts that had an aggregate value of US$10,000 or more at any time during the year. Note that “foreign financial accounts” is different from “foreign financial assets,” which is the trigger for Form 8938. Financial accounts are essentially bank or brokerage accounts. These accounts must be reported on Form 8938, as well, if you qualify for that form, too (it has different, higher dollar triggers).

I’ve always found it interesting that on the FBAR is a box you can check if you have a certain number of offshore accounts. Checking this box lets you off the hook. If you have 25 foreign accounts or more, you don’t need to complete the form in detail. You simply disclose that you have 25 accounts or more, and you’re done.

Note that you are still required to maintain account records in case the Treasury department decides it would like some further details.

Note further that the breakpoint originally was 10 accounts. Then it was increased to 15…before being raised to the current 25.

While the number of accounts required before you’re opted out of the requirement to detail each one of them has increased and, presumably, as a result, the number of people required to complete the detail on FBAR each year has increased, the minimum deposit threshold (of US$10,000) hasn’t changed since the inception of the form in 1970.

Just as the US$10,000 reporting limit for anyone crossing an international border with cash in his pocket hasn’t increased, again, since 1970.

Now, US$10,000 in 1970 isn’t the same as US$10,000 in 2013. Using the U.S. Consumer Price Index (which is not necessarily the best indicator of inflation but the easiest to find and the one the government uses), the 2013 equivalent of US$10,000 in 1970 is almost US$60,000 (US$59,210).

Or, considered in the reverse, the US$10,000 threshold still in effect today is the equivalent of US$1,690 in 1970 dollars.

In other words, the government is requiring citizens to file forms to report accounts that have a relatively very insignificant amount of money in them.

The cost in both time and actual expense for citizens completing the FBAR form (some engage and pay for professional help) and sending it in to the government…coupled with the cost of the U.S. government processing all these forms seems high to me. Especially as, in the end, what this often comes down to is a guy living on Social Security in Costa Rica who happens to have more than US$10,000  in his local savings account.