US taxes? The mystery of exchange rates happily solvedFor anyone filing US tax returns and FBARs it has always been a tough job each year hunting around both the IRS and the US Treasury website to find out which exchange rates might be acceptable. Thankfully, the IRS & US Treasury have recently published clear guidelines including the exchange rates for calendar year 2015; which can all be found at the links below.
US INCOME TAXThe average IRS “Unofficial Rates” for recent calendar years can all be found here:
https://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates.
These exchange rates published annually by the IRS reflect the typical exchange rates for cash (which the IRS calculate using the interbank rate plus 4%).
The unofficial IRS exchange rates are always the average for every day in any calendar year; which for Pounds Sterling for calendar year 2015 was 0.6490 (in other words for US income tax purposes £1.00 is equal to $1.541). To convert from Pounds into Dollars for a tax return one divides the amount in Pounds by this exchange rate of 0.6490; so for example £100 divided by 0.6490 would be an amount of $154.
FBARs and Form 8938These additional returns (reporting non-US financial accounts and assets) both typically require conversion into US dollars using the official US Treasury exchange rate on 31st December each year.
Anyone filing an “FBAR” (Report of Foreign Bank and Financial Accounts - FinCEN Form 114), or IRS FATCA Form 8938 (Statement of Foreign Financial Assets), for the calendar year 2015 will be delighted to know that the official exchange rates for 2015 have also all been published. These official 31 December 2015 exchange rates can be found here:
https://www.fiscal.treasury.gov/fsreports/rpt/treasRptRateExch/currentRates.htm.
As historic rates are not published in full on the US Treasury website, the IRS has been kind enough to provide several years of past rates here:
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Treasury-Department-End-of-Year-Exchange-Rates. As US law states that no other exchange rates are permitted, it is really helpful to have these FBAR and FATCA exchange rates so readily available.
What is an FBAR?Separate from United States income tax returns, many US persons are required to file with the US Treasury a return commonly known as an “FBAR” (or Report of Foreign Bank and Financial Accounts; known as FinCEN Form 114), listing all non-US bank and financial accounts. These forms are required if on any day of any calendar year a US person (e.g. US citizen, green card holder, corporation, charity or trust) has ownership of or signature authority over non-US bank and financial accounts where all accounts have an aggregate (total) balance greater than the equivalent of $10,000.
If the $10,000 limit is reached, FBAR filing by the deadline each year is compulsory. Missing the deadline could result in US government penalties.
These forms are in addition to United States income tax returns and are due to be filed each year in relation to the previous calendar year. The 2015 FBAR is due to be filed by 30 June 2016. This date cannot be extended.
Following a change in the law signed by the US President on 31 July 2015, the 2016 FBAR will be due to be filed by 17 April 2017; but during 2017 this new filing date can be extended up to 16 October 2017.
FBAR forms are downloaded; prepared and then re-uploaded and filed, directly from this link:
http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html.
