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Don’t Go To Jail Over Your Foreign Accounts
By Stacie Clifford Kitts, CPA
Okay – so what does that mean?
It means that if you are trying to hide income in a foreign account, your bank is going to tattle on you to the Internal Revenue Service.
So…..If you do have cash or an investment in a foreign account – or have signing authority over a foreign account, you need to make sure you are properly reporting it to the IRS.
Form TD F 90-22.1 Report of Foreign Bank and Financial Accounts is for this purpose. The Form is due and must be received by the IRS no later than June 30 each year. And, if you don’t file it – be ready to receive a whopping $10,000 fine.
In addition, all foreign income must also be reported on your income tax return.
However, there is some good news. The IRS has recently announced a new voluntary disclosure program that allows U.S. taxpayers until September 23, 2009 to disclose any previously unreported accounts and income. Here’s some more good news, if you follow the guidelines of the program, the IRS promises not to refer you to the Department of Justice for criminal prosecution.
For more information, take a look at these frequently asked questions offshore activities.
Since not reporting your offshore activity can subject you to criminal prosecution by the Department of Justice, it is HIGHLY recommended that you learn what your responsibility is concerning this type of activity.
Note: The filing relief deadline has been extended to June 30, 2010 for taxpayers who need to file an FBAR report for 2008, 2009 or earlier calendar years if they meet the following criteria:
1) persons with signature authority over, but no financial interest in, a foreign financial account, and
2) persons with a financial interest in, or signature authority over, a foreign commingled fund.
See notice 2009-62 for more information
Foreign Bank Account Reporting
Issue Number: IR-2008-079
Inside This Issue
IRS Reminds Taxpayers to Report Certain Foreign Bank and Financial Accounts by June 30
WASHINGTON –– The Internal Revenue Service today reminded U.S. persons who have bank and other financial accounts in a foreign country that they may be required to report those accounts to the U.S. Department of Treasury by the June 30 deadline.
With globalization, more people in the U.S. have foreign financial accounts. There is nothing improper about setting up or maintaining such accounts. Still, IRS officials are concerned that U.S. persons may overlook that their accounts are large enough to trigger reporting obligations.
“There are responsibilities that go along with owning such foreign bank and financial accounts,” said IRS Commissioner Doug Shulman. “Foreign account owners must remember that they may have to report their accounts to the government, even if the accounts do not generate any taxable income.”
Since 2000, the number of Report of Foreign Bank and Financial Accounts (FBAR) forms received by the Treasury has increased by nearly 85 percent, from 174,528 in 2000 to 322,414 in 2007. Despite this significant increase in filings, concern remains about the degree of reporting compliance for those who are required to file.
U.S. persons are required to file a Report of Foreign Bank and Financial Accounts (FBAR), Form TD F 90-22.1, each year if they have a financial interest in or signature authority or other authority over any financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.
The 2007 FBAR form is due June 30, 2008.
The FBAR is not an income tax return and should not be mailed with any income tax returns. The FBAR must be filed on or before June 30 of the following year to: U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI 48232-0621.
Unlike with federal income tax returns, requests for an extension of time to file an FBAR are not granted.
Civil and criminal penalties for non-compliance with the FBAR filing requirements are severe. Civil penalties for a non-willful violation can range up to $10,000 per violation. Civil penalties for a willful violation can range up to the greater of $100,000 or 50 percent of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together.
If a holder of a foreign account was required to file FBARs for earlier years, however, he or she should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be assessed if IRS determines that the late filings were due to reasonable cause. The account holder should keep copies of their statement for his or her own record.
FBAR information returns for the 2007 calendar year must be filed with the U.S. Department of Treasury, P.O. Box 32621, Detroit, Mich., 48232-0621. The address for commercial delivery is: U.S. Department of Treasury, Currency Transaction Reporting, 985 Michigan Avenue, Detroit, Mich., 48226.
The FBAR form is not available for electronic filing, but many income tax software packages can prepare a printed copy. FBAR forms and instructions are also available on IRS.gov or the FinCEN Web site and by calling 1-800-829-3676.
Taxpayers who need assistance completing Form TD F 90-22.1 can contact the IRS by telephone at 1-800-800-2877, option 2, or via email at FBARquestions@irs.gov.
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