Don't Miss the June 30, 2010 Filing Deadline for the Foreign Bank and Financial Account Report (FBAR)
FBAR Filing Requirement
All U.S. persons that have a financial interest in, or signature or other authority over, one or more foreign financial accounts with an aggregate value that exceeds $10,000 at any time during the calendar year, are required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), on or before June 30th of the following year. The June 30, 2010 deadline for reporting 2009 accounts is fast approaching.
No extensions are available for this filing deadline and an extension of time to file federal income tax returns does not extend the due date for filing an FBAR. For more information on the filing requirement for the FBAR, including access to the FBAR form, visit the FBAR resources on the IRS website .
Civil and criminal penalties for non-compliance with the FBAR filing requirements are severe. The Internal Revenue Service (IRS) is aggressively monitoring the reporting of offshore accounts. Last year, the IRS announced a major compliance initiative that included a voluntary disclosure program to encourage taxpayers that had not previously disclosed foreign bank accounts and reported income from them to do so. Therefore, any U.S. person that ignores the FBAR filing requirements does so at the risk of imposition of substantial penalties if subsequently discovered by the IRS.
Special Rules for 2009 FBAR Reporting
On February 26, 2010, the IRS issued IRS Notice 2010-23 providing guidance to certain filers of FBARs who had been previously granted an extension of time until June 30, 2010, to file their reports for 2008 and prior years. In August 2009, the IRS issued Notice 2009-62, which extended the 2008 (and any prior year) FBAR filing deadline until June 30, 2010, for:
(1) Persons with no financial interest in a foreign account but with signature or other authority over that account; and
(2) Persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund.
IRS Notice 2010-23 further extends and provides the following relief to 2009 FBAR filers:
Signature Authority Filers
Persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report their signature authority over those foreign financial accounts. Thus, the June 30, 2011 deadline now applies to FBARs reporting signature authority over foreign financial accounts for the 2010 and prior calendar years.
This further extension for signature authority accounts may indicate that the IRS is considering eliminating, entirely, the need to file signature authority accounts on the FBAR.
Certain Foreign Commingled Funds
Persons with a financial interest in, or signature authority over, a foreign commingled fund that is a mutual fund are required to file an FBAR. For calendar year 2009 and prior years, the IRS will not interpret the term “commingled fund” as applying to funds other than foreign mutual funds with respect to FBARs. Thus, a financial interest in, or signature authority over, a foreign hedge fund or private equity fund, will not be required to be reported in an FBAR for 2009 and earlier calendar years. Further guidance may be expected on these accounts.
Summary and Conclusion
The combination of the increased scrutiny being placed on offshore accounts by the Treasury, and the potential stiff penalties for non-compliance, requires immediate attention to completing and filing the FBAR, if required, by June 30, 2010 deadline.
Although Notice 2010-23 does not provide permanent relief to those FBAR filers having only signature authority over foreign financial accounts, the notice hints that further guidance may be coming in this area. However, the permanent relief from filing FBARs for 2009 and earlier years for a financial interest in, or signature authority over a foreign hedge fund or private equity fund is welcome news for many.
Please contact your Schneider Downs representative if you have any questions regarding your specific FBAR filing requirements for calendar year 2009.
Schneider Downs provides accounting, tax, wealth management 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 purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.