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Report of Foreign Bank and Financial Accounts (FBAR)



If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

Recent FBAR Guidance

On February 24, 2011, the Treasury Department published final regulations amending the FBAR regulations. These regulations became effective March 28, 2011, and apply to FBARs required to be filed with respect to foreign financial accounts maintained in calendar year 2010 and for FBARs required to be filed with respect to all subsequent calendar years. The FBAR form and instructions (PDF) have been revised to reflect the amendments made by the final regulations.
On May 31, 2011, the Financial Crimes Enforcement Network (FinCEN) issued FinCEN Notice 2011-1 (PDF), revised June 6, 2011, to provide administrative relief for certain individuals with signature authority over but no financial interest in foreign financial accounts. On February 14, 2012, FinCEN extended this relief by Notice 2012-1. The deadline to report signature authority over certain accounts has been extended to June 30, 2013 per FinCEN Notice 2012-1 (PDF), for the following individuals:
  • an employee or officer of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of a controlled person of the entity; or
  • an employee or officer of a controlled person of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of the entity, the controlled person, or another controlled person of the entity.
For purposes of FinCEN Notice 2011-1, a controlled person is a United States or foreign entity more than 50 percent owned (directly or indirectly) by an entity under 31 CFR § 1010.350(f)(2)(i)-(v).
On June 16, 2011, the IRS issued Notice 2011-54 to provide additional administrative relief for individuals with signature authority but no financial interest whose filing requirements were properly deferred under Notice 2009-62 or Notice 2010-23. The deadline to file the FBAR for these individuals was extended until November 1, 2011. This extension only applies to reports for the 2009 or earlier calendar years. This Notice did NOT extend the reporting deadline for calendar year 2010.
On June 17, 2011, FinCEN issued Notice 2011-2 (PDF) to facilitate more accurate
compliance with FBAR filing requirements. Notice 2011-2 was issued to provide administrative relief for certain officers or employees of investment advisors registered with the Securities and Exchange Commission who have signature or other authority but no financial interest in certain foreign financial accounts. On February 14, 2012, FinCEN extended this relief by Notice 2012-1. The deadline to report signature authority over certain accounts has been extended to June 30, 2013, per FinCEN Notice 2012-1 (PDF), for those specified individuals working for advisors registered with the Securities and Exchange Commission.
On Jan 9, 2012, the IRS reopened the OffshoreVoluntary Disclosure Program following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.

Who Must File an FBAR

United States persons are required to file an FBAR if:
  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
  1. Certain foreign financial accounts jointly owned by spouses;
  2. United States persons included in a consolidated FBAR;
  3. Correspondent/nostro accounts;
  4. Foreign financial accounts owned by a governmental entity;
  5. Foreign financial accounts owned by an international financial institution;
  6. IRA owners and beneficiaries;
  7. Participants in and beneficiaries of tax-qualified retirement plans;
  8. Certain individuals with signature authority over but no financial interest in a foreign financial account;
  9. Trust beneficiaries; and
  10. Foreign financial accounts maintained on a United States military banking facility.
Look to the FBAR instructions to determine eligibility for an exception and to review exception requirements.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040,
the "Other Information" section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder's reporting obligation.
The FBAR is not filed with the filer's federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR is an annual report and must be received by the Department of the Treasury in Detroit, MI, at one of the two addresses below, on or before June 30th of the year following the calendar year being reported.
File by mailing the FBAR to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
If an express delivery service is required for a timely filed FBAR, address the parcel to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: (313) 234-1062
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.

Electronic Filing for FBAR Forms

On July 18, 2011, FinCEN announced that it has developed an electronic filing system that will accept the FBAR form. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, read the FinCEN news release.

New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.

FBAR Assistance

Help in completing Form TD F 90-22.1 (PDF) is available Monday - Friday, 8 a.m. to 4:30 p.m. Eastern time, at 866-270-0733 (toll-free inside the U.S.) or 313-234-6146 (not toll-free, for callers outside the U.S.). The form is available online at IRS.gov and Financial Crimes Enforcement Network Web site or by telephone at 800-829-3676. Questions regarding the

 For the assistance contact Lance Wallach at lancewallach.com or call 516-935-7346

2 comments:

  1. Only use a cpa that was with the IRS

    ReplyDelete
  2. NEW JERSEY ASSOCIATION OF
    ACCOUNTANTS
    NEWSLETTER
    JANUARY 2009


    IRS Small Business and Self-Employed Division Will Emphasize Enforcement Activities over the Next Year
    By Lance Wallach
    Over the next 12 months, the Small Business and Self-Employed Division (SB/SE) of the Internal Revenue Service will focus on taxpayer services and increased enforcement. SB/SE owns the majority of the tax gap. Enforcement has a necessary presence when you are talking about tax administration.
    However, that enforcement will recognize that there are taxpayers who cannot properly prepare their tax returns, taxpayers who will not properly prepare their returns and some who truly need assistance with compliance. That is coupled and balanced with, in many cases, education and taxpayer services. How such “recognition” will occur is unclear.
    Some of the areas SB/SE will be examining include passthrough entities, high income filers and abusive transactions. S corporations are likely to receive particular scrutiny. Further review would not be limited to S corporations, but would extend to pass through entities like partnerships, which can expect to receive a “significant amount of attention” because SB/SE has found an area of abuse and would like to curb what is called a growing trend of abusive transactions. There also will be a renewed effort to address high income filers, typically classified as those with an adjusted gross income of over $200,000.

    Bruce Hink, who has given me permission to utilize his name and circumstances, is a perfect example of what the IRS is doing to unsuspecting business owners. What follows is a story about Bruce Hink and how the IRS fined him $200,000 a year for being in what they called “a listed transaction”. In addition, I believe that the accountant who signed the tax return and the insurance agent who sold the retirement plan will each be fined $200,000 as material advisors. We have received a large number of calls for help from accountants, business owners and insurance agents in similar situations. Don’t think this will happen to you? It is happening to a lot of accountants and business owners, because most of these so called listed, abusive plans, or plans substantially similar to the so-called listed, abusive plans are currently being sold by most insurance agents currently.




    Lines From Lance
    Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications and has written numerous best-selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.

    .

    ReplyDelete