Insights

The Internal Revenue Service (IRS) has announced that it will permit taxpayers who meet certain requirements to file Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (FBAR), by September 23, 2009 without facing penalties.

Background

The deadline to file an FBAR for a U.S. person who had a financial interest in or signature or other authority in certain foreign financial accounts during the 2008 calendar year is
June 30, 2009. The IRS had previously announced that it will not impose penalties on a taxpayer filing a delinquent FBAR with respect to previous years (i.e., years prior to 2008) if the IRS receives the taxpayer’s FBAR by September 23, 2009, and if the taxpayer complies with requirements similar to those described below with respect to delinquent 2008 FBAR Forms¹.

Additional Time

The IRS has amended its previous guidance to state that in the case of a taxpayer who has only recently learned of its FBAR filing obligation and has insufficient time to gather the necessary information to complete the FBAR, the IRS will not impose penalties on the taxpayer if the IRS receives the taxpayer’s FBAR by September 23, 2009, and if taxpayer complies with the procedures described below:

(1) In the case of a taxpayer who has reported (i.e., already filed a 2008 tax return) and paid tax on all of his/her 2008 taxable income, the taxpayer should file the delinquent FBAR with the Detroit Treasury office and attach a statement explaining why the FBAR is being filed late. In addition, the taxpayer should send a copy of the delinquent FBAR, together with a copy of his/her 2008 tax return to the Offshore Identification Unit at the following address:

Internal Revenue Service
11501 Roosevelt Boulevard
South Bldg., Room 2002
Philadelphia, PA 19154
Attn.: Charlie Judge, Offshore Unit, DP S-611

(2) In the case of a taxpayer who timely reports all 2008 taxable income with respect to a foreign financial account (i.e., files a return after June 30, 2009), the taxpayer must follow the procedures described in (1) above^2.

For 2008 tax returns due after September 23, 2009, the tax return does not need to accompany the FBAR. Taxpayers anticipating filing a delinquent 2008 FBAR and having a 2008 or fiscal 2009 return with an original or extended due date after September 23, 2009 should consider waiting to file those returns to avoid the requirement to provide a copy of the return to the Offshore Identification Unit.

Discussion

Without specifically stating so in its amended guidance issued June 24, 2009, the IRS’s presumed reason for granting the additional time to file the 2008 FBAR is the confusion and panic that has resulted from the IRS’s June 12 announcement that it considers an offshore hedge fund to be a foreign financial account for FBAR purposes. Accordingly, many hedge fund owners have just learned that they may have an FBAR filing obligation and may not have sufficient time to gather the information necessary to file the FBAR by the June 30, 2009 due date.

Summary

Since the IRS has not technically granted a blanket extension for all FBAR forms until September 23, 2009, we advise those filers not having foreign private equity investment or hedge fund issues to file by the June 30, 2009 deadline. In addition, those filers who have sufficient information on their foreign private equity investments and hedge funds should file by June 30 to avoid having to send a copy of their 2008 income tax return along with the delinquent 2008 FBAR to the Offshore Identification Unit. Please contact any member of your Schneider Downs tax engagement team for further clarification and guidance.

Schneider Downs provides accounting, tax and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.

This advice is not intended or written to be used for, and it cannot be used for, the purposes of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or
recommending to another person, any tax related matter. 

¹ See Question 9 in the FAQs available at http://www.irs.gov/pub/irs-utl/faqs-revised_6_24.pdf
² See Question 43 in the FAQs referenced in Footnote 1.

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