If you have a foreign bank account or you are the signature authority on a foreign bank account then you must file a FBAR if the combined balance of your foreign accounts (at any time during the year) is more than $10,000. The Federal form 90-22.1 must be in the “hands” of the Department of Treasury by June 29, 2012 ? no extensions are permitted.
Some basic FBAR guidelines to be aware of are:
1. Who This Applies To: U.S. taxpayers including citizens, residents, and entities that have financial interest in signature or other authority over any foreign financial accounts that exceed $10,000. In addition, foreign persons required to file are those that are doing business in the U.S. on a regular and continuous basis. Persons who are merely visiting the US or those who sporadically conduct business in the U.S. are not required to file the FBAR.
Financial accounts include any bank or brokerage account held outside the U.S. For example, an individual with a Citibank account in the Cayman Islands will be required file. It should be noted that a person owning a foreign bond or stock is not required to file unless it is held in a foreign brokerage account.
Also, if a U.S. citizen has signature authority over an account, he or she is required to file the FBAR. A person has signature authority over an account if the person can control the disposition of money or other property in it by delivery of a document containing his or her signature to the bank or other person whom the accounts maintained. Other authority equivalent to signature authority is if a person can exercise power that is comparable to signature authority.
2. Due Date: June 29th, 2012: By June 30th each year (June 29th for 2012 as June 30th is a Saturday), every U.S. citizen is required to file an informational form if he or she has either (1) a financial interest, or (2) signature over any foreign financial accounts, provided the aggregate values of the account: $10,000 at any time during the year.
3. Affected Accounts: Foreign bank and brokerage accounts as well as offshore mutual funds or pooled investments. Also, keep in mind foreign branches of U.S. institutions are treated as foreign.
4. Penalties: The penalties for not filing an FBAR are severe. The fees are $10,000 for each non-willful violation. If willful, the penalty is upwards of $100,000 or 50% of the amount in the account for each violation. Each year you didn’t file is a separate violation. In some extreme cases, jail time may occur. No extension to file beyond the June 29th due date is permitted even if one’s business or personal income tax return is “on extension.”
Examples:
1. A U.S. citizen opens a Canadian bank account and gives another person power of attorney over the account. Both individuals are required to file the FBAR.
2. A U.S. corporation that owns a foreign company with foreign bank accounts. The corporation will file a FBAR for the foreign account as well as the primary owner of the U.S. corporation.
Exceptions to filing requirements:
Certain U.S. persons are permitted to maintain a foreign account without the requirement to file the FBAR when:
1. Accounts in U.S. military banking facilities operated by a U.S. fund or institution to serve U.S. government installations.
2. An officer or employee of a bank which is subject to the supervision of the Comptroller of Currency, the Board of Governor of the Federal Reserve System, or the FDIC.
We are always here to help our valued clients. It is always best practice to consult your accountant when filing any type of tax return forms, especially the FBAR (Form TD F 90-22.1).
