Client Alert: June 30 Deadline for Foreign Bank Account Reporting (FBAR) Requirements
This is a reminder that U.S. taxpayers with a financial interest over foreign financial accounts exceeding $10,000 in the aggregate at any point during the 2010 tax year must file a Form TD F 90-22.1 with the Internal Revenue Service (IRS) by June 30, 2011. The form must be received by the IRS by such date rather than postmarked by such date. The IRS has recently expanded the group of persons subject to the filing requirement and has also provided a new opportunity for U.S. taxpayers to file FBARs for prior years without incurring penalties.
Penalties associated with the failure to file an FBAR can be severe -- up to $10,000 per year for each nonwillful violation, and the greater of $100,000 or 50 percent of the balance of the foreign account for willful violations.
Who Must File?
U.S. taxpayers, including citizens, residents and entities with foreign financial accounts, including bank, brokerage mutual fund, trust and other foreign accounts, if the aggregate total of the accounts exceeds $10,000 are required to submit an FBAR to the IRS. In some cases, financial accounts would also include overseas life insurance policies or annuities. The filing requirement was also recently extended to include persons with mere signatory authority or authority in the capacity as an officer, director or shareholder over the foreign accounts of corporations or partnerships. The filing deadline with respect to such individuals, however, was recently extended to June 30, 2012. This extension applies only to an employee or officer of a covered entity who has signature authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity.
Opportunity to File Prior-Year FBARs and Other International Information Returns Without Penalty
The IRS announced that it will accept, without penalty, the late filing of an FBAR from taxpayers who recently learned of their filing obligation if they reported all income and tax associated with their foreign financial accounts. These taxpayers can file Form TD F 90-22.1 by August 31, 2011, for previous tax years without incurring penalties. The form must be received by the IRS by such date rather than postmarked by such date.
This window of opportunity to cure filing failures without penalty also includes a number of other foreign information returns (e.g., Forms 5471, 5472, 8858, 8865, etc). Thus, taxpayers who have paid all tax but failed to file the required international information return can avoid penalties if they meet the August 31, 2011 filing deadline. Otherwise, taxpayers with delinquent filings may incur penalties of $10,000 for each year the taxpayer nonwillfully failed to file the information return.
Circular 230 Disclosure: To ensure compliance with requirements imposed by Treasury and the IRS, we inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used and cannot be used for the purpose of (i) avoiding tax penalties that may be imposed under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another person any transaction or matter addressed herein.