U.S. citizens and permanent residents are required to file a Foreign Bank Account Report (FBAR) if the balance in any foreign financial account exceeds $$10,000 at any time during the year, and may be subject to penalties of up to $$100,000 or more for failure to file. This is one of the most common tax obligations missed by Korean Americans who maintain savings, insurance, and stock accounts in Korea.
FBAR vs FATCA: The Differences
| Item | FBAR (FinCEN 114) | FATCA (Form 8938) |
|---|---|---|
| Jurisdictions | Department of the Treasury (FinCEN) | Internal Revenue Service (IRS) |
| Reporting criteria | Combined balance exceeds $10,000 | $ Over $50,000 (Individual, U.S. resident) |
| How to submit | BSA E-Filing (Online) | File with your tax return |
| Deadlines | April 15 (automatically extended to October 15) | Same as tax filing deadline |
| Failure to file penalty | Accidental: up to $10,000/report (Bittner v. US, 2023 - imposed per report, not per account); willful: up to $100,000 or 50% of the balance, whichever is greater | $10,000~$50,000 |
Important: The two reports are separate obligations and must be submitted separately if both are applicable.
Korean accounts that a single person must report
- Bank deposits: Savings, CDs, Time Deposits, Savings
- Securities accounts: Stocks, funds, bonds
- Insurance: Surrender value of savings policies
- Annuities: National pension, retirement pension (some exemptions available)
- Joint accounts: All accounts with signature permissions (can include parent accounts)
How to self-report if you haven't filed
Streamlined Filing Compliance Procedures
For non-willful non-filing, you can use the IRS's Streamlined Voluntary Agreement program. Amend and file your most recent three years of tax returns and six years of FBARs, and face a 5% penalty if you're a U.S. resident.
Delinquent FBAR Submission
If you filed your taxes correctly but missed the FBAR, you may be able to waive the penalty if you file late with a reasonable explanation.
Frequently asked questions
Q. Do I need to report my Korean National Pension?
It may be subject to FBAR reporting, but its exemption from FATCA Form 8938 as a Social Security benefit is controversial. This depends on your individual situation and requires professional consultation.
Q. If my name is on my parents' account, do I have to report it?
Any account in which you have Signature Authority or Financial Interest is subject to FBAR reporting, even if it is not owned by you. Be careful if you have a Korean bank account with your children's names in joint names.
Q. Will I be penalized for not reporting so far?
If it wasn't intentional, you can minimize the penalty through the voluntary disclosure program. It's much more favorable to self-disclose before the IRS finds out first. Talk to an expert as soon as possible.
Report foreign assets, don't procrastinate. Contact the Law Offices of Jin Dong Cho for a FBAR/FATCA filing and self-disclosure consultation.
Phone: (718) 353-2699 | Email: jd@choattorneys.com
