As a reminder, if you have a financial interest or signature authority of a foreign bank account (FBAR), you are required to file Form TD F 90-22.1 annually with the Department of Treasury on or before June 30, 2012. Keep in mind that this deadline is a “received by” deadline versus the standard “mailed by” deadline.
The FBAR – Who Has Reporting Obligations?
A United States person who has a financial interest in or signature authority over foreign financial accounts must file a FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
A foreign financial account is an account defined as located outside of the United States. This would include an account maintained with a branch of a United States bank that is physically located outside of the United States or an account maintained with a foreign bank located outside of the United States.
Foreign financial accounts can include and are not limited to securities, brokerage, savings, demand, checking, deposit, time deposit, or another account maintained with a financial institution (or other person performing the services of a financial institution), a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
You don’t have to have a direct financial interest in the account to fall under these requirements, and there are several exceptions to the requirements.
Also, if you have a power of attorney for signature authority or other authority comparable to signature authority, over the financial account, you are required to file a FBAR (even if the power of attorney has not been exercised).
The FBAR – Consequences For Non-compliance?
Failure to file the FBAR, either non-willfully or willfully, can carry potential civil penalties of anywhere from $10,000 to $100,000 or 50% of the amount of the transaction or balance of foreign account at time of the offense. Criminal penalties and imprisonment can also apply for more serious willful offenses.
The FBAR – Recent Developments?
On January 9, 2012, the Internal Revenue Service re-opened the Offshore Voluntary Disclosure Program (OVDP) which primarily focuses on non-compliance of FBARs. This is a result of the strong interest in the 2009 and 2011 Offshore Voluntary Disclosure Initiative (OVDI) programs to assist taxpayers in getting current with their offshore compliance reporting. Terms are generally the same as 2011 OVDI with an increase in penalty from 25% to 27.5% of highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. There is no deadline for filing under the new OVDP however the IRS can end it at any time.
Discuss with your tax advisor about what constitutes a foreign financial account or assets to determine if these reporting requirements apply to you or someone you know as well. These requirements carry strict reporting and filing deadlines. The requirements and exceptions are fairly complex, so we look forward to assisting you with your reporting obligations and questions you may have.
Our B&V International Tax Services team is ready to assist with questions and reporting of your FBAR. For more information about B&V International Tax Services, please feel free to contact Lien Le, International Tax Partner at LLe@bvccpa.com.