As June 30 approaches and summer vacation plans are beginning to take shape, you can sit back, relax and be glad that you have already taken care of your 2011 Form TD F 90-22.1 filing responsibility with the Internal Revenue Service (IRS). You did file your Form TD F 90-22.1, right?
The Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), has been hiding in the bowels of the IRS basement since 1972. Taxpayers have historically been seemingly oblivious to any filing requirements, while IRS enforcement has been lax until recently. With all the dialogue about offshore voluntary disclosure program offered by the IRS in 2009, 2011 and now in a third offshore disclosure program effective January 9, 2012—that we reported on in our January 24, 2012, article—this little-known form has emerged from the voluminous federal form filing cabinets onto the front-page overnight.
The Purpose of This Form
The FBAR form is a tool utilized by the U.S. government to identify persons who may be using foreign financial accounts to circumvent U.S. tax laws. Revenue agents or investigators use the FBAR to help identify or trace funds used for illicit purposes, including counter-terrorism, or to identify unreported income maintained and generated abroad. While U.S. citizens are taxed on worldwide income, many foreign financial institutions do not adhere to the same reporting requirements as domestic financial institutions (i.e., Form 1099s).
Who Is Required to File
Any United States person, with few exceptions, who has a financial interest in, or signature authority or other authority over, any foreign financial account(s) in a foreign country and the aggregated value of these account(s) exceeds $10,000 at any time during the calendar year must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. Foreign financial account(s) include, but are not limited to, a checking/savings bank account, brokerage account, mutual fund, trust or other type of foreign financial account.
What Needs to Be Reported
If a filing requirement exists, personal information, such as name, address and Social Security number, along with the following, must be reported:
- Maximum value of the account during the calendar year;
- Type of account (i.e., bank, securities, etc.);
- Name of financial institution in which the account is held;
- Account number, and;
- Mailing address of financial institution.
The IRS defines maximum account value as the largest amount of currency and/or monetary instruments that appear on any quarterly or more-frequently issued account statement during the tax year.
Failure to File
While Form TD F 90-22.1 is an information return that imposes no tax, significant civil and criminal penalties may be asserted for noncompliance. Civil penalties range from $500 to $100,000, while criminal penalties range from $10,000 to $500,000, including incarceration of up to 10 years.
Taxpayers with foreign accounts may want to consult with a qualified tax professional to ensure compliance with all necessary tax filings related to their foreign account(s) and to potentially avoid the onerous penalty assessments that may result from a failure to report.
For Further Information
If you would like more information about this topic or your own unique situation, please contact Rod Anello in the Tax Accounting Group or the practitioner with whom you are regularly in contact.
As required by United States Treasury Regulations, you should be aware that this communication is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under United States federal tax laws.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.