The deadline for Foreign Bank Account Reporting was June 30. The Report of Foreign Bank and Financial Account is IRS TD F 90-22.1 (.pdf). 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 must file the report. An FBAR must be filed whether or not the foreign account generates any income.
Although FBAR requirement has been around for a few years, the IRS recently revised the filing requirements. It seems to have caught many people by surprise.The IRS had extended the FBAR Filing deadline to September 23 for taxpayers who reported and paid tax on all their 2008 taxable income, but only recently learned of their FBAR filing obligation and have insufficient time to gather the necessary information to complete the FBAR.
There are a few instances that the filing requirement seems unclear and really unexpected, so the IRS further extended the filing deadline in two instances:
- Persons with no financial interest in a foreign financial account but with signature or other authority over the foreign financial account.
- Persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund.
If that is you, then then you have until June 30, 2010 to file FBARs for the 2008, 2009 and earlier calendar years.
In the first instance, company officers and employees were caught off guard that they need to personally file an FBAR for company accounts. As part of IRS Notice 2009-62 (.pdf), the Department of the Treasury is requesting comments regarding when a person with signature authority over, but no financial interest in, a foreign financial account should be relieved of filing an FBAR for the account. Especially, when the person with a financial interest in the account has filed an FBAR.
The second instance was triggered by statements made by the IRS in June indicating their view that the term “foreign commingled fund” includes private investment funds organized outside the United States. As part of IRS Notice 2009-62 (.pdf), the Treasury Department is asking for comments on this approach.
References:
- IRS Notice 2009-62 (.pdf) extending deadline
- September 23 Deadline for Some FBAR Filers from the Internal revenue Service
- IRS Extends Deadline for Filing FBAR from WebCPA
- IRS Extends FBAR Filing Deadline for Certain U.S. Persons (.pdf) by Goodwin Procter LLP
- IRS Grants FBAR Filing Extension for Certain U.S. Persons (.pdf) by Morgan Lewis
Saw your Tweet on this topic. Yeah the FBAR situation is a gigantic FUBAR SNAFU. :-) On multiple levels. This problem — and these clients — are currently swamping my international tax law firm.
The FBAR amnesty is designed to collect data so the IRS can pursue additional enforcement. Someone should take the IRS to school and introduce them to Statistics 101–the data pool from which they derive conclusions is skewed:
– The people who are coming forward (in my experience) are the normal, law-abiding people who didn’t know about all of the international compliance forms. They are not tax evaders in any sense of the word and the amounts in question are trivial.
– The people who are not coming forward in the amnesty are exactly the droids that the IRS is looking for.
This is not a random sample. The sample set the IRS sees is pre-selected by the choice of the sample population itself. The sample set says nothing about people outside the sample set. I’m a male human being. I don’t buy stuff that female humans buy. So don’t look at my shopping behavior and make inferences about what my wife will do. That’s the IRS’s basic error.
This leads us to the second failure of the FBAR amnesty. The amounts being collected in taxes and penalties will be trivial. Our esteemed Federal government will be shocked to find out that they won’t be able to balance this year’s budget on the back of the evil folks who have undisclosed offshore accounts.
The cure would be simple. Right now the amnesty has a “20% of high balance between 2003 and 2008” penalty for being a bad dog. It’s too expensive and it is preventing a lot of people from coming forward. Drop it to peanuts. Get people in the system. Get the assets in the system for income taxation. Get the assets in the system for estate taxation. In the long run that will pay vastly more than the 20% penalty ever will.
The IRS offers up “if the standard audit procedures result in a lower penalty for FBAR noncompliance we will give you that lower penalty.” Problem is? It isn’t predictable if you look at the Internal Revenue Manual guidelines. Solution: make it cheap, make it predictable. Everyone gets the “nonwillful” mitigation, don’t layer the penalties per account, don’t layer them per year.
Which brings us around to the third problem, which you pointed out with your useful acronyms. Dear IRS, get yer ducks lined up before you whip out your shotgun and blast away at ’em, FFS. :-)
@philiphodgen