Confused about FBAR filing requirement for Singapore

[dolphin]

My wife and I are filing our first joint tax return, which is also her first tax return in the US.  She is from Singapore, where she has:

• CPF (a retirement account, mandated by the government)
• Some insurance policies that she pays into each month. 

The total amount of these is between U.S. $10k and $100k.  She has transferred most or all of her savings to US accounts.

We consulted an accountant who is from overseas (based in the U.S.) and has fairly extensive experience with FBAR.  (We found him because he had advertised helping others file FBAR at an international store we frequent.)  He reviewed the recent statements of these accounts and told us that we do not need to file FBAR.  He also said the CPF money is not taxable until she takes it out, which she can't do for a while.

I'm confused about this because, as I am going through TurboTax and the IRS's documentation, it looks like we do need to file.  I'm not expecting him to give us TurboTax support, so I thought this was a good question for this forum.

Here's what I put in TurboTax:

• At "Tell Us About Any Foreign Bank Accounts", I selected:
  • "I had a bank, broker, or other financial account in a foreign country"
  • "I signed on, or had other authority, over [it]"
• Value over $10k: Yes
• Then TurboTax told me "You need to file a report" (FBAR).  I selected the country (Singapore).
• TurboTax took me to a "Tell Us About Any Foreign Trusts" screen.  My wife doesn't have any of these, as far as we're aware.  So I said "None of the above".
• The next screen asked if we have any foreign financial assets, including bank or investment accounts.  I said:
  • Yes, we do have these
  • No, we did not live in a foreign country.
• Then there is a screen that says "About the Amount of Your Foreign Financial Assets".  I checked "No", it was not worth more than $100k (average) or $150k (at any time) in 2019.
  • Now TurboTax says, "Based on what you told us, it turns out you don't need to report your foreign financial assets."

The two statements in bold seem to contradict themselves.  Why would TurboTax say this?  Do we need to file FBAR?

[AmyC · Accepted solution]

If you fail to report and should have, that is bad. If you report and did not need to, no harm. I would file since you moved assets this year to be safe. I use the link you supplied frequently. It is correct. Follow the IRS guidelines and ignore everybody else in the future.

[dolphin]

Thanks @AmyC.  I have some follow-up questions:

1. The Singapore accounts' forms are complex.  (My wife received about 6 separate statements from the insurance company for different pieces of the insurance policy, and none of them clearly say "this is the value of the account.")  How would we be able to figure out this value?  That's why we contacted the accountant in the first place.
2. The Singapore accounts' forms list the balance in SGD.  Is there a standard, accepted way to handle the conversion to USD?  Or does the FBAR form support SGD in some way?
3. The money in my wife's retirement account can't be touched until retirement age, and her life insurance policy matures over 10 years from now before paying out.  Is there a way to express this on the FBAR, or would FinCEN/IRS have a way to figure it out?
4. Would we owe taxes on these accounts?
5. Are we ready to file our U.S. federal tax return now?  (The FBAR is the only thing that might be delaying that.)

I'm sorry that this is so many questions, but this is a very unfamiliar process for us and I've been trying to figure it out for months!

[AmyC]

1.Can you contact the administrator for the Singapore accounts? They must deal with this on a regular basis with other customers.

2. IRS Yearly Average Exchange Rates

3. Just need the total in the account.

4. There is no tax, it is just reporting.

5. Yes! The FBAR is not part of the tax return. It is filed separately. File FBAR through the Financial Crimes Enforcement Network.

Welcome and good luck! We are here year round to help!

[dolphin]

Thanks @AmyC!  We did find this document from the IRS today, which says:

"But, you don’t need to report foreign financial accounts that are:

• Correspondent/Nostro accounts,
• Owned by a governmental entity,
• Owned by an international financial institution,
• Maintained on a United States military banking facility,
• Held in an individual retirement account (IRA) you own or are beneficiary of,
• Held in a retirement plan of which you’re a participant or beneficiary, or
• Part of a trust of which you’re a beneficiary, if a U.S. person (trust, trustee of the trust or agent of the trust) files an FBAR reporting these accounts."

The CPF is owned by a governmental entity.  The insurance policies are owned by an international financial institution.  So I think that is where the accountant's answer was coming from.  My wife's only other account is a bank account with less than U.S. $2k.

(Side note: that webpage is under Small Businesses & Self-employed, but it says in the content of the page that these requirements apply to individuals, too.)

TurboTax is a little bit confusing here.  I guess on "Tell Us about Any Foreign Bank Accounts", I should still check the same boxes.  But on "Value of All Your Foreign Accounts", should I say no (it's not over $10k)?  That screen should have been more specific.

[KarenJ2]

TurboTax  meant that you do need to file the Report of Foreign Bank and Financial Accounts but you do not need to File Form 8938.

If you say no, that your foreign financial accounts are not more than $10,000 then you do not need to file the FBAR.  My suggestion is to file the FBAR if you have any questions at all about whether or not you should file.  The US Treasury is very focused on foreign financial accounts.

Make sure you have used the correct exchange rates to verify the amounts:  In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (select Exchange Rates under Reference & Guidance)Treasury Reporting Rates of Exchange for the last day of the calendar year. 

Comparison of Form 8938 and FBAR Requirements

[dolphin]

@KarenJ2 This doesn't really answer my question about the wording that confused me in TurboTax.  This article from the IRS which I shared in the previous post says that retirement accounts and accounts "owned by an international financial institution" (not sure what that means...) did not need to be reported.  Depending on which accounts need to be reported, we may be under the $10,000 threshold, too.

[KarenJ2]

Thank you for checking back. 

Please see this link for more information on International Financial Institutions  If you do not have an FBAR filing requirement, then you do not need to file the FBAR.  I have just always erred on the side of caution if  there are any doubts.