US tax filings can be complex, costly and complicated. However, one form which many clients can usually complete themselves is the FBAR, which stands for Foreign Bank Account Reporting.

This is another name for Form FinCEN114, Report of Foreign Bank Accounts.

Whilst this form can frequently be completed by clients without professional help, thus saving on accounting fees, there are usually a few questions which arise that are hard to find the answers to online.

We’ll address those here:

Who needs to file an FBAR?

An FBAR is required to be filed by any US citizen who has combined maximum foreign bank balances during the year exceeding $10,000 USD.

To break that down, a foreign bank account is any non-US account, which includes NZ accounts.

With regards to the maximum account balance combined, this is where we look at each of your financial accounts individually, and tally up the maximum value of each during the year.

For example, using a client who has three bank accounts:

Account A - $4000 maximum value - February 2024

Account B - $3000 maximum value - May 2024

Account C - $5000 maximum value - December 2024

As you can see above, if we combine the individual maximums of each account, we arrive at a total of $12,000, meaning this client needs to file an FBAR.

What is the purpose of the FBAR?

The stated purpose of the FBAR form, is to prevent money laundering and similar issues, and to force disclosure of foreign accounts held by US citizens worldwide.

There are significant penalties for failing to file the FBAR.

Will I owe tax on my FBAR?

Absolutely not. The FBAR is not a taxable form, it is simply a reporting requirement. The FBAR is not actually an IRS form, but as above, it is required by the Department of the Treasury’s FinCEN department. It is administered by the IRS on the treasury’s behalf.

But, there are no tax liability implications of filing an FBAR.

Can I file my own FBAR online from New Zealand?

You can indeed. This can be done using the Department of the Treasury website here.

What NZ accounts do I need to include on my FBAR?

You need to include on your FBAR any New Zealand financial account. This includes:

• NZ bank accounts

• Term deposits

• Credit cards

• Loans

• Mortgages

• Retirement funds

• Brokerage accounts

• Investment accounts (ie Sharesies)

• Share trading accounts (ie ComputerShare)

• Custodial accounts (ie children’s accounts)

• Company or trust bank accounts

Do I need to include my New Zealand KiwiSaver on my FBAR?

Yes, you do indeed. KiwiSaver is considered to be a foreign financial account for US tax purposes, and does need to be included on an FBAR

Do I need to include Wise accounts on my FBAR?

Yes, Wise (TransferWise) is treated as a foreign financial institution for FBAR purposes. Any accounts held through Wise should be reported on your FBAR.

How do I report loan accounts on an FBAR?

This is a good question. When we take into account that the purpose of the FBAR is to report the highest balance of an account, then loan or credit accounts pose an interesting question.

Loan or credit accounts usually require reporting with a maximum value of Zero.

We’re not interested here in the credit limit, or the level of debt, but only positive balances within the loan account.

So, in the case of a credit card, provided you do not overpay your credit card bill (ie to put your account into a positive balance), then usually the maximum value of a loan account is zero.

Do I need to convert my balances to USD for the FBAR?

Yes, all New Zealand account balances should be converted to USD using the treasury rate for the year. These are published online each January.

The treasury NZD to USD rate for 2024 is 1.781.

How do I convert my bank balance to USD for the FBAR?

For this, we take the NZD bank balance, and divide it by the NZD/USD rate above.

So, if you had $2000 NZD, we divide this by 1.781: 2000/1.781‎ = 1,122.965USD.

Summary

As you can see above, completing an FBAR is not overtly complex, however it can be convoluted and time consuming.

It is important to ensure you obtain good US tax advice from an NZ based specialist, to ensure that you are meeting your reporting obligations.

At the US Tax Team New Zealand, we provide specialist US tax advice you can rely on – info@usatax.nz