Report Foreign Financial Accounts by June 30th
Henry M. Morris
Regulations issued in February of this year under the authority of the Bank Secrecy Act and amending the Report of Foreign Bank and Financing Account Regulations, require certain U.S. persons having overseas financial accounts to file Form TD F 90-22.1, a Report of Foreign Bank and Financial Accounts (FBAR). The new regulations became effective March 28, 2011. If a taxpayer is required to file an FBAR for a calendar year, the report must be filed (received) by the United States Department of the Treasury by June 30 of the following calendar year. The June 30 filing deadline cannot be extended. Those required to file an FBAR are those who have overseas financial accounts in which the taxpayer has a financial interest or over which the taxpayer has signature authority, which accounts in the aggregate total $10,000 or more at any time during the prior year. For purposes of filing the FBAR, the term “U.S. person” includes U.S. citizens (irrespective of residence), U.S. residents, entities organized under the laws of the United States (including but not limited to corporations, limited liability companies and partnerships), and estates and trusts formed under the laws of the United States. The obligation to file exists notwithstanding the fact that the account or accounts may produce no income.
The definition of a financial account is quite broad. It includes, but is not limited to, “…a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution).” In addition, a financial account includes a commodities futures or option account, insurance with cash value, an annuity policy with cash value and shares in a mutual fund or similar pooled fund.
The penalties for failure to file may be civil and/or criminal. The instructions to the FBAR read as follows:
“A person who is required to file an FBAR and fails to properly file may be subject to a civil penalty not to exceed $10,000. If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed. A person who willfully fails to report an account or account identifying information may be subject to a civil monetary penalty equal to the greater of $100,000 or 50% of the balance in the account at the time of the violation. See 31 U.S.C. section 5321(a)(5). Willful violations may also be subject to criminal penalties under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. section 1001.”
The regulations contain significant exceptions to the filing requirements, to those accounts covered by the statute, and to the filing obligations of persons with only signatory authority over overseas accounts. We urge that if you think that you may be covered by these provisions, you contact your Aronberg Goldgehn attorney or a member of our tax department.