AARO Survey on e-filing of FinCEN Form 114 (the Foreign Bank Account Report)
Survey conducted from June to October, 2014
The purpose of the survey was to see how filers fared with the newly-mandatory e-filing process and, if applicable, to identify any specific problems that could be resolved. Not only will AARO use the results to better inform future filers in hopes of smoothing the process but it will forward these results to those responsible for drafting future changes to the on-line form, in hopes that some minor “fixes” might be possible.
This article presents the results of the survey together with some concrete recommendations, both from respondents and from AARO itself. While the survey sample was small, the result coincide with those of other studies and point to some much-needed changes.
Before looking at the results, one obvious caveat is required: the survey was only distributed online; respondents were therefore all people with access to computers and some knowledge of filling in online forms.
The first comment we are obliged to make to those responsible for these forms is that there are great numbers of would-be compliant US persons living outside the United States for whom 1) access to a computer and the internet is not a given, 2) reliable power sources are not available at all times, and/or 3) the financial investment in a computer with an up-to-date operating system capable of handling Form 114 is out of the question (this particularly applies to the large numbers of retired people).
To ensure compliance with filing requirements, it is essential that paper filing be allowed.
Of 247 respondents to the survey, 218 filed their FBAR including 16 for the first time. Of those who filed, 26 reported that they did not meet the June 30 deadline, 33 refused or were unable to e-file, and 52 called on the services of a third-party filer. In this respect, it should be noted that a tax-preparer’s bill for such services appears to range from $500 to $1500: a huge financial burden which could be reduced in a number of ways.
Very few reported that they found the process easy and generally, only to say “it got easy once (they) got the hang of it,” whereas 80 called it difficult, “complicated and time-consuming”.
Eleven of the respondents commented specifically on their security concerns in submitting so much sensitive information on line, noting that the process was “ripe for identity theft”.
Survey responses were received from 32 countries including the United States (6). The countries were as diverse as Canada, Estonia, Costa Rica, the UAE, Norway and Singapore. Below are some typical responses to the survey questions, along with suggestions for improvement from the respondents and from AARO.
1 - User-friendliness of Treasury Form 114
Of the 64 comments regarding ease in understanding the filing instructions, 65% reported that they were too complicated:
“The long instructions are unclear and simpler language should be used” (26)
“The classifications for the various types of accounts were unclear, which account should appear on the form” (3)
“It would be helpful to provide more information about how to save draft versions to work on further and check before final signature” (5)
Many (close to half) said they were “scared to make mistakes” or felt “threatened by the language”. A frequent comment is that respondents do not understand why law-abiding citizens are required to report accounts to the “Financial Crimes” Enforcement Network (FinCEN).
62 of the respondents also commented on way the form is set up and 76% found it “tedious to complete” or were unsure as to the “type of account” they were reporting.
It appears clear that the form should be simplified, given the great numbers of people who are expected to file, their often limited patience, their sometimes limited computer skills, etc.
Specifically, respondents recommend:
- Simplify the instructions and give clear guidelines as to account types (remembering that accounts are held in a broad range of countries with different banking systems)
- Extend the filing deadline (allow filing with the 1040) given the difficulty in collecting all the information in countries where banks do not systematically provide daily balances
- Allow copying previous forms that can simply be updated from year to year
- Provide for automatic population of certain fields (bank name and address, country) which can be identical for up to 24 accounts
- Exclude accounts in which the filer has no financial interest (e.g. power of attorney, accounts of organizations where filer is President or Treasurer, etc.)
2 – Technical issues
Of the 73 who reported hardware/software problems, 52 attributed them to the required use of the most recent version of Adobe or to the fact that the form was not “Mac-friendly”.
Some also noted that their browser was not supported. Most recommend allowing the option of filing a paper form, as recommended above.
In addition, 26 made comments like:
- “Keep in mind that seniors are not computer savvy”
again, pointing up the need for acceptance of a paper form.
Specific recommendations to ensure compliance:
- Have the form tested by non-expert users (or tech writers) to catch problems (like computer or software incompatibility).
- Do not require the latest version of a single software program which, in turn, can be run only on recent computer operating systems.
- Permit filing a paper form.
3 – Time burden
In addition to computer and software difficulties, many respondents echoed the comment of 2 who described this as “the most awful experience”.
Essentially, this is due to the difficulty many report in gathering all of the information to file. Most international filers live in countries where banking systems are extremely different from the United States, and acquiring maximum balances during the year, and in some cases year-end values, can be a long and tedious process. Even people with only one account (rare) will therefore spend more than the “estimated average burden associated with collection of this information (i.e.) 20 minutes per respondent or record keeper” (noted on Page 1 of Form 114). In addition, all balances must be converted into US dollars at the IRS-approved rate, further complicating reporting and raising concerns about making errors. A more reasonable estimate for collection and reporting of this information by the average international filer would be 20 to 30 minutes per account.
- As recommended above, extend the filing deadline.
- As recommended above, allow for copying and amending previous versions and for automatic population of repetitive information.
4 – On filing the FBAR
In addition to technical or logistical difficulties, many respondents not surprisingly commented on their annoyance at having to file the FBAR at all. For some, as noted above, this was for security reasons. Many resent the cost of the CPA or tax preparer they need. Still others note the time required to gather the information and/or enter duplicate information multiple times.
One third party filer, a tax attorney, noted, “The law underlying the FBAR is totally necessary and Treasury has clear statutory authority to require it; but it has no authority whatsoever to compel good-faith small filers to have a computer or IT skills.”
Lastly, many resent the assumption that the accounts they maintain for their daily needs are potentially criminal and feel they are unfairly singled out by the U.S. government simply because they live abroad.
Finally, in light of the above results, AARO also reiterates its long-standing recommendation that:
- the filing threshold should be raised. In today’s world, the only people whose aggregated balances would not exceed the equivalent of $10,000 are those with no savings or retirement accounts, no privately owned homes with bills and mortgages to pay, no children or parents they are required to support financially… A reasonable recommendation would be, at the least, to apply the threshold that currently applies to U.S. residents filing IRS Form 8938, i.e. $50,000 aggregate.
- “same country” accounts should be excluded. U.S. residents are not required to file IRS Form 8938 or FinCEN Form 114 for accounts in the United States. Filers able to show that they are fiscally domiciled in another country and have accounts there needed to pay taxes and bills, save for retirement, pay mortgages, receive salary, etc. should not be required to report those accounts, of which the foreign country is already fully aware.