Foreign Bank Account Reporting Deadline Approaching– May 13, 2014 by Ray Polantz

The IRS’ persistent focus on U.S. taxpayers’ overseas activities continues to highlight the need to comply with all related disclosure requirements. Specifically, if you have a financial interest in or signature authority over a foreign financial account, the Bank Secrecy Act may require you to report the account annually by electronically filing a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

What's new this year?

The FBAR filing requirement has been around for quite some time, but there have been some updates over the last year. For 2013 reporting, FinCEN Form 114 supersedes Form TD F 90-22.1 (the FBAR form that was used in prior years) and is now only available online through the BSA e-Filing System website. In the past, FBARs could be paper-filed.

Who must file an FBAR?

Generally, any U.S. person with a financial interest in, or signature or other authority over, any foreign financial accounts with an aggregate value exceeding $10,000 at any time during the year must file an FBAR with the U.S. Department of Treasury. FBARs are due by June 30th of the year following the calendar year being reported. The June 30th filing date cannot be extended.

Here are some key definitions:

  • “U.S. person” means U.S. citizens; U.S. residents; and U.S. entities, including but not limited to corporations, partnerships or limited liability companies.
  • A “financial account” is broadly defined to include more than just a bank account. It also includes a securities, brokerage, savings, demand, checking, deposit or other account maintained with a financial institution.
  • A “foreign financial account” is any financial account located outside of the U.S.
  • A U.S. person has a “financial interest” in an account if that U.S. person is the owner of record of the foreign account. U.S. persons are also deemed to own the foreign accounts of majority-owned entities (both foreign and domestic).
  • An individual has “signature or other authority” if he or she has authority to control funds or other assets in the financial account by direct communication to the person maintaining the account. For a company that has a foreign account, the controller or CFO often has this authority.

What are the penalties for not filing?

A U.S. person who non-willfully fails to report information on foreign accounts can be subject to civil penalties up to $10,000 per violation. Willful failures to report can result in penalties of up to the greater of $100,000 or 50% of the highest balance in the account at the time of violation. Willful violators could also be subject to criminal penalties.

What if I have unreported income from a foreign account?

The IRS continues to offer its latest version of the Offshore Voluntary Disclosure Program, which offers people with unreported taxable income from offshore financial accounts an opportunity to resolve their tax and information reporting obligations, including the FBAR. Although the program does not have an official closing date, the IRS may end the program at any time.

For non-resident U.S. taxpayers presenting a low compliance risk, the IRS has a relatively new streamlined filing program. The program includes, but is not limited to, dual citizens residing outside the U.S. since January 1, 2009, and who have not filed U.S. income tax and information returns.

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This communication is for information only, and any action should only be taken after a detailed review of the specific situation and appropriate consultation.

Notwithstanding that these materials do not constitute legal, accounting or other professional advice, as may be required by United States Treasury Regulations and IRS Circular 230, you should be advised that these materials are not intended or written to be used, and cannot be used by you or any other person, for the purpose of avoiding penalties that may be imposed under federal tax laws. No written statement contained in these materials may be used by any person to support the promotion or marketing of or to recommend any federal tax transaction(s) or matter(s) addressed in these materials, and any taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor with respect to any such federal tax transaction matter.