IRS Foreign Bank Account Reporting Form (FBAR)

[Riser Adkisson LLP]

Report of Foreign Bank and Financial Accounts (FBAR)


If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund or other type of financial account, then you may be required to report the account yearly to the Department of the Treasury. Under the Bank Secrecy Act, each United States person must file a Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if

(1) The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and

(2) The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

A United States person is not prohibited from owning foreign accounts but civil and criminal penalties may apply for failures to properly file FBARs when required. The information reported on an FBAR may be used for governmental purposes, including law enforcement and tax compliance purposes.

Due Date

The annual due date for filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), is June 30. The FBAR must be received by the IRS on or before June 30. Unlike tax returns, the FBAR is considered filed on the day it is received by the IRS. Postmarks are not considered evidence of timely filing.

FBAR Assistance

Help in completing Form TD F 90-22.1 is available at (800) 800-2877, option 2. The form is available online at IRS.gov or by telephone at (800) 829-3676. Questions regarding the FBAR can be sent to FBARquestions@irs.gov

Source: http://www.irs.gov/newsroom/article/0,,id=210247,00.html?portlet=6

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FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - Filing Requirements


What is an FBAR?
Who must file an FBAR?
What is a foreign country?
What constitutes signature or other authority over an account?
Is an FBAR required by a US resident with elderly parents in Canada who has a power of attorney on accounts in Canada, but never exercised it?
How do foreign account holders report their accounts to the IRS?
Form 1040NR does not require a Schedule B. If the person filing the form has foreign accounts, must he now attach a Schedule B to his return?
When is the FBAR due?
Where are FBAR forms available?
Is there a help line for questions about completing the form?
Where do account holders file the FBAR?
How does an FBAR filer amend a previously filed FBAR?
What is the statute of limitations for assessing civil penalties for violations of the FBAR requirements?
Can cumulative FBAR penalties exceed the amount in a taxpayer's foreign accounts?
How long should account holders retain records of the foreign accounts?
What happens if an account holder is required to file an FBAR and fails to do so?
For filing FBARs for prior years, should the current FBAR form be used or should the previous version of the form be used?
Does more than one form need to be filed for a husband and wife owning a joint account?
Does the IRS have an email address to send questions regarding the FBAR?

Q. What is an FBAR?

A. An FBAR is a Report of Foreign Bank and Financial Account. The form number is TD F 90-22.1 (PDF).

Q. Who must file an FBAR?

A. Any United States person who has a financial interest in or signature authority, or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year

Q. What is a foreign country?

A. A “foreign country” includes all geographical areas outside the United States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and the territories and possessions of the United States (including Guam, American Samoa, and the United States Virgin Islands).

Q. What constitutes signature or other authority over an account?

A. A person has signature authority over an account if such person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.

Other authority exists in a person who can exercise power that is comparable to signature authority over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.

Q. Is an FBAR required by a US resident with elderly parents in Canada who has a power of attorney on accounts in Canada, but never exercised it?

A. Yes, if the power of attorney gives the U.S. resident signature authority, or other authority comparable to signature authority, over the financial accounts. Whether or not such authority is ever exercised is irrelevant to the FBAR filing requirement.

Q. How do foreign account holders report their accounts to the IRS?

A. The holders report their foreign accounts by completing boxes 7a and 7b on Form 1040 Schedule B and completing Form TD F 90-22.1 (PDF).

Q. Form 1040NR does not require a Schedule B. If the person filing the form has foreign accounts, must he now attach a Schedule B to his return?

A. At present, there is no requirement to attach a Form 1040 Schedule B to Form 1040NR. A person filing a Form 1040NR is not required to attach Schedule B to his return.

Q. When is the FBAR due?

A. The FBAR is due by June 30th of the year following the year that the account holder meets the $10,000 threshold. The granting, by IRS, of an extension to file Federal income tax returns does not extend the due date for filing an FBAR. There is no extension available for filing the FBAR.

If an account holder does not have all the available information to file the return by June 30th, they should file as complete a return as they can and amend the document when the additional or new information becomes available.

Q. Where are FBAR forms available?

A. FBAR forms are available:

On the IRS.gov (PDF) Web site.
On the Department of the Treasury’s Financial Crimes Enforcement Network Web site for Money Services Businesses.
By calling IRS at (800) 829-3676.
Q. Is there a help line for questions about completing the form?

A. You can get answers to questions concerning the FBAR form by calling (800) 800-2877, option 2.

Q. Where do account holders file the FBAR?

A. Send completed forms to:

U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621

The FBAR is not to be filed with the filer’s Federal tax return.

Q. How does an FBAR filer amend a previously filed FBAR?

A. FBAR filers can amend a previously filed FBAR by:

Checking the Amended box in the upper right hand corner of the first page of the form;
Making the needed additions or correction;
Stapling it to a copy of the original FBAR; and
Attaching a statement explaining the changes.
Q. What is the statute of limitations for assessing civil penalties for violations of the FBAR requirements?

A. Civil penalties can be assessed anytime up to six years after the date of the violation.

Q. Can cumulative FBAR penalties exceed the amount in a taxpayer's foreign accounts?

A. Yes, under the penalty provisions found in 31 U.S.C. 5314(a)(5), it is possible to assert civil penalties for FBAR violations in amounts that exceed the balance in the foreign financial account.

Q. How long should account holders retain records of the foreign accounts?

A. Records of accounts required to be reported on an FBAR must be retained for a period of five years. Failure to maintain required records may result in civil penalties, criminal penalties, or both.

Q. What happens if an account holder is required to file an FBAR and fails to do so?

A. Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties, or both. If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause. Keep copies, for your record, of what you send.

Q. For filing FBARs for prior years, should the current FBAR form be used or should the previous version of the form be used?

A. The current FBAR form (revised in October 2008) may be used to report a financial interest in, or signature or other authority over, financial accounts that were maintained in years prior to 2008. However, since the changes to the current FBAR form reflect a change in the reporting requirements, the instructions for the prior version of the FBAR form (revised in July 2000) may be relied upon for the purpose of determining the filing requirements for properly reporting financial accounts maintained in calendar years prior to 2008.

Q. Does more than one form need to be filed for a husband and wife owning a joint account?

A. No, if the names and social security numbers of the joint owners are fully disclosed on the filed FBAR. A spouse having a joint financial interest in an account with the filing spouse should be included as a joint account owner in Part III of the FBAR. The filer should write (spouse) on line 26 after the last name of the joint spousal owner. If the only reportable accounts of the filer's spouse are those reported as joint owners, the filer's spouse need not file a separate report. If the accounts are owned jointly by both spouses, the filer's spouse should also sign the report. It should be noted that if the filer's spouse has a financial interest in other accounts that are not jointly owned with the filer or has signature or other authority over other accounts, the filer's spouse should file a separate report for all accounts including those owned jointly with the other spouse.

Q. Does the IRS have an email address to send questions regarding the FBAR?

A. You can send questions concerning the FBAR to FBARquestions@irs.gov. The email system does not accept actual FBAR reports.

Source: http://www.irs.gov/businesses/small/article/0,,id=210244,00.html

[Riser Adkisson LLP]

FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - Financial Accounts


What is a financial account?
What's meant by the term “commingled funds”?
What does “maximum value of account” mean (for Box 15 on the FBAR)?
How do you determine the "highest value" in the account during the previous calendar year?
Is an FBAR required if the account generates neither interest nor dividend income?
Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold?
Does the term “other authority over a financial account” mean that a person, who has the power to direct how an account is invested, but who cannot make disbursements to the accounts, has to file an FBAR?
A N.Y. corporation owns a foreign company that has foreign accounts. The corporation will file an FBAR for the foreign company's accounts. Do the primary owners of the U.S. Company also have to file?
A company has over 25 foreign accounts. What should they enter in Part ll of the FBAR?
If a United States person holds a partnership interest in a hedge fund that is located in the United States but that owns foreign financial accounts, must the United States person report his interest in a hedge fund on an FBAR, assuming the United States person does not hold more than a 50% partnership interest in the hedge fund?
What are the exceptions to the FBAR filing requirement?

Q.What is a financial account?

A. A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution or other person engaged in the business of a financial institution. Individual bonds, notes, or stock certificates held by the filer are not a financial account nor is an unsecured loan to a foreign trade or business that is not a financial institution.

Q. What's meant by the term “commingled funds”?

A. The reference to “commingled fund” appears in the definition, in the instructions for the FBAR, for the term “financial account.” The instructions state that the term “financial account” generally encompasses accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund. An example of such a commingled fund account would be a mutual fund account.

Q. What does “maximum value of account” mean (for Box 15 on the FBAR)?

A. The maximum value of account is the largest amount of currency and non-monetary assets that appear on any quarterly or more frequent account statements issued for the applicable year. If periodic account statements are not issued, the maximum account value is the largest amount of currency or non-monetary assets in the account at any time during the year. Convert foreign currency by using the official exchange rate at the end of the year.
The value of stock, other securities or other non-monetary assets in an account reported on TD F 90-22.1 (PDF) is the fair market value at the end of the calendar year. If the asset is withdrawn from the account, the value is the fair market value at the time of the withdrawal.

Q. How do you determine the "highest value" in the account during the previous calendar year?

A. The FBAR instructions state that the maximum value of an account is the largest amount (not the average amount) that appears on periodic account statements that are issued at least quarterly. If the financial institution does not issue periodic account statements, then the maximum value is the largest amount of cash and non-monetary assets that were in the account at any time during the year.

Q. Is an FBAR required if the account generates neither interest nor dividend income?

A. Yes, an FBAR must be filed whether or not the foreign account generates any income.

Q. Is an FBAR required for accounts maintained with financial institutions located in a foreign country if the accounts hold noncash assets, such as gold?

A. Yes. An account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.

Q. Does the term “other authority over a financial account” mean that a person, who has the power to direct how an account is invested, but who cannot make disbursements to the accounts, has to file an FBAR?

A. No, an FBAR is not required because the person has no power of disposition of money or other property in the account.

Q. Must a U.S. person file an FBAR on a Eurodollar account in the Cayman Islands?

A. Yes, the Cayman Islands account is a foreign account.

Q. A N.Y. corporation owns a foreign company that has foreign accounts. The corporation will file an FBAR for the foreign company’s accounts. Do the primary owners of the U.S. Company also have to file?

A. Yes, if any owner directly or indirectly owns more than 50 percent of the total value of the shares of stock, that owner will have to file an FBAR.

Q. A company has over 25 foreign accounts. What should they enter in Part ll of the FBAR?

A. If the filer holds a financial interest in more than 25 accounts, check the yes box in item 14 and indicate the number of accounts in the space provided. Do not complete any further items in Part II or Part III of the report. Sign the form in item 44/45 and enter the date signed in item 46. Any person who lists more than 25 accounts in item 14 must provide all the information called for in Part II and Part III when requested by the Department of the Treasury.

Q. If a United States person holds a partnership interest in a hedge fund that is located in the United States but that owns foreign financial accounts, must the United States person report his interest in a hedge fund on an FBAR, assuming the United States person does not hold more than a 50% partnership interest in the hedge fund?

A. Generally, no. If the hedge fund is located in the United States, a financial interest in the hedge fund is not an interest in a foreign financial account for FBAR reporting purposes, even though the hedge fund may have foreign operations. If the domestic partnership has a financial interest in a foreign financial account, then it may have to file an FBAR. If a United States person who is an officer, employee, or partner of the partnership has a financial interest in, or signature or other authority over a foreign financial account, then that person may also have to file an FBAR. If a partner owns an interest in more than 50 percent of the profits of the partnership (distributive share of income, taking into account any special allocation agreement) or more than 50 percent of the capital of the partnership, then that partner has a financial interest, for FBAR reporting purposes, in the foreign financial accounts of the partnership and may have to file an FBAR.

Q. What are the exceptions to the FBAR filing requirement?

A.Accounts in U.S. military banking facilities, operated by a United States financial institution to serve U.S. Government installations abroad, are not considered as accounts in a foreign country. For this reason, these accounts do not have to be reported on an FBAR.

An officer or employee of a bank which is subject to the Supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation need not report that he has signature or other authority over a foreign bank, securities or other financial account maintained by the bank, if the officer or employee has NO personal financial interest in the account.

An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, need not file a report concerning the other signature authority over a foreign financial account of the corporation, if he has NO personal financial interest in the account and he has been advised, in writing, by the chief financial officer of the corporation that the corporation has filed a current report, which includes that account.

Source: http://www.irs.gov/businesses/small/article/0,,id=210249,00.html

[Riser Adkisson LLP]

FAQs Regarding Report of Foreign Bank and Financial Accounts (FBAR) - United States Person


What is a United States person?
Who is considered to be doing business in the United States for FBAR reporting purposes?
Would a foreign athlete or entertainer that occasionally visits the U.S. in order to compete or perform in an event, be considered a United States person for FBAR purposes?
A person is a non-resident alien and only visits the United States to manage his personal interests, such as rental property. Does that person have to file an FBAR?
A non resident alien who doesn't meet the 183 day test is a partner in a US partnership where the US partnership deals with rentals; must he file an FBAR?
An American citizen, X, gives a person who is a citizen or resident of the U.S. power of attorney to X's Canadian bank accounts. X files an FBAR form annually. Does the power of attorney also need to file an FBAR?
A fiduciary who is a U.S. person has control as a trustee for an IRA with a foreign account. Should an FBAR be filed?
Is a single member LLC, which is a disregarded entity for US tax purposes, a United States person for FBAR purposes?

Q. What is a United States person?

A "United States person" includes a citizen or resident of the United States, or a person in and doing business in the United States. The term "person" includes individuals and all forms of business entities, trusts, and estates.

Q. Who is considered to be doing business in the United States for FBAR reporting purposes?

A. Whether a person is considered, for FBAR purposes, to be in, and doing business in the United States is determined based on an analysis of the facts and circumstances of each case. Generally, a person is not considered to be in, and doing business in the United States unless that person is conducting business within the United States on a regular and continuous basis. Persons who are merely visiting the United States or who sporadically conduct business in the United States, are not in, and doing business in, the United States for FBAR reporting purposes. For example, a person who is not a citizen or resident of the United States and who is engaged in a business but who only occasionally visits the United States to meet customers or business associates would not be in, and doing business in the United States for FBAR reporting purposes.

Q. Would a foreign athlete or entertainer that occasionally visits the U.S. in order to compete or perform in an event, be considered a United States person for FBAR purposes?

A. Artists, athletes, and entertainers who are not citizens or residents of the United States and who only occasionally come to the United States to participate in exhibits, sporting events, or performances, do not have to file FBARs.

Q. A person is a non-resident alien and only visits the United States to manage his personal interests, such as rental property. Does that person have to file an FBAR?

A. A person who is not a United States citizen or resident and who visits the United States to manage his personal investments, such as rental property, and conducts no other business, is not considered to be in, and doing business in, the United States for FBAR reporting purposes and does not have to file FBARs.

Q. A non resident alien who doesn't meet the 183 day test is a partner in a US partnership where the US partnership deals with rentals; must he file an FBAR?

A. With the October 2008 revision to the FBAR form and instructions, FBARs are now required by nonresidents who are in, and doing business in, the United States. Whether a person is a nonresident alien for tax purposes has no bearing on the person's FBAR reporting obligation. The domestic partnership may have to file FBARs if it has a financial interest in, or signature authority (or other authority that is comparable to signature authority), over a financial account that is located in a foreign country. Whether a person is considered to be in, and doing business in, the United States is determined based on an analysis of the facts and circumstances of each case. Generally, a nonresident is not considered to be in, and doing business in the United States for FBAR reporting purposes if he only holds a partnership interest in a domestic partnership.

Q. An American citizen, X, gives a person who is a citizen or resident of the U.S. power of attorney to X's Canadian bank accounts. X files an FBAR form annually. Does the power of attorney also need to file an FBAR?

A. Yes, because the power of attorney has signature or other authority over the accounts and because he is a U.S. person.

Q. A fiduciary who is a U.S. person has control as a trustee for an IRA with a foreign account. Should an FBAR be filed?

A. Yes, because the fiduciary is a U.S. person.

Q. Is a single member LLC, which is a disregarded entity for US tax purposes, a United States person for FBAR purposes?

A. Yes, the tax rules concerning disregarded entities do not apply with respect to the FBAR reporting requirement. FBARs are required under Title 31, not under any provision of the Internal Revenue Code.

Source: http://www.irs.gov/businesses/small/art ... 52,00.html

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Statement from IRS Commissioner Doug Shulman on Offshore Income

March 26, 2009

My goal has always been clear — to get those taxpayers hiding assets offshore back into the system. We recently provided guidance to our examination personnel who are addressing voluntary disclosure requests involving unreported offshore income. We believe the guidance represents a firm but fair resolution of these cases and will provide consistent treatment for taxpayers. The goal is to have a predictable set of outcomes to encourage people to come forward and take advantage of our voluntary disclosure practice while they still can.

In the guidance to our people, we draw a clear line between those individual taxpayers with offshore accounts who voluntarily come forward to get right with the government and those who continue to fail to meet their tax obligations. People who come in voluntarily will get a fair settlement. We set up a penalty framework that makes sense for them — they need to pay back-taxes and interest for six years, and pay either an accuracy or delinquency penalty on all six years. They will also pay a penalty of 20 percent of the amount in the foreign bank accounts in the year with the highest aggregate account or asset value. Just to be clear, this is 20 percent of the highest asset value of an account anytime in the past six years. This gives taxpayers — and tax practitioners — certainty and consistency in how their case will be handled.

We have instructed our agents to resolve these taxpayers’ cases in a uniform, consistent manner. Those who truly come in voluntarily will pay back taxes, interest and a significant penalty, but can avoid criminal prosecution.

At the same time, we have also provided guidance to our agents who have cases of unreported offshore income when the taxpayer did not come in through our voluntary disclosure practice. In these cases, we are instructing our agents to fully develop these cases, pursuing both civil and criminal avenues, and consider all available penalties including the maximum penalty for the willful failure to file the FBAR report and the fraud penalty.

We believe this is a firm, but fair resolution of these cases. It will make sure that those who hid money offshore pay a significant price, but also allow them to avoid criminal prosecution if they come in voluntarily. As we continue to step up our international enforcement efforts, this is a chance for people to come clean on their own. Our guidance to the field is for the next six months only, after which we will re-evaluate our options.

For taxpayers who continue to hide their head in the sand, the situation will only become more dire. They should come forward now under our voluntary disclosure practice and get right with the government.

Source: http://www.irs.gov/newsroom/article/0,,id=206014,00.html