This alert serves as a reminder that you may need to file a Report of Foreign Bank and Financial Accounts with respect to your foreign assets. For calendar year 2015, an FBAR is required to be filed on or before June 30, 2016. The FBAR form is now called FinCen Report 114, and superseded the Form TD F 90-22.1.
U.S. persons (i) with “foreign financial accounts” that in the aggregate exceeded $10,000 at any time during the prior calendar year, or (ii) that have signatory authority or other authority over such foreign accounts, are required to electronically file an FBAR. A “foreign financial account” includes, but is not limited to, foreign bank accounts, securities accounts, mutual funds, cash value life insurance, and annuities.
The phase “U.S persons” covers U.S. citizens, U.S. resident aliens and domestic entities. An FBAR must be filed on or before June 30th for activities related to the preceding year (i.e., June 30, 2016, is the filing date for reporting foreign financial assets during the 2015 calendar year). No extension is available for additional time to file the FBAR. Significant penalties may be imposed for failure to file an FBAR report.
An FBAR filing may trigger other filings as well, including but not limited to Schedule B of Form 1040, which requires an individual taxpayer to indicate if he or she has ownership of or signature authority over foreign financial accounts, and if so, whether FBAR reporting is required. (Forms for entities or trusts also have similar questions.) Form 8938, Statement of Foreign Financial Assets, may also be required to be filed with the 1040. Moreover, ownership of a foreign financial asset through a foreign entity or trust structure may trigger additional reporting on Forms 3520, 3520-A, 5471, 8865 and 8858. Additionally, certain types of foreign financial assets, e.g. foreign mutual funds, may trigger specific reporting forms.
FBAR FILING DATE CHANGES FOR NEXT YEAR
An FBAR for next year is due at the same time as an individual income tax return is due – i.e., April 15, 2017, and not by June 30, 2017. Furthermore, an extension will be available to extend this due date for up to 6 months.
IMPACT OF FATCA
The Foreign Account Tax Compliance Act provisions of the Hiring Incentives to Restore Employment Act of 2010 (“FATCA”) generally requires that foreign financial institutions report the ownership by U.S. persons of foreign accounts and investments to the IRS. Reporting under FATCA is intended to make the IRS aware of unreported foreign accounts and investments. Reporting under FATCA has already begun and information on U.S. taxpayers’ foreign financial assets is flowing into the IRS.
QUESTIONS AND OPTIONS
A number of questions may arise regarding who is required to file the FBAR form and with respect to which accounts. Moreover, for U.S. persons with undisclosed or improperly disclosed accounts, a number of compliance alternatives exist to bring these accounts into U.S. compliance, each with its own benefits and risks. DUGGAN BERTSCH provides foreign financial asset counseling, advice, and specific disclosure planning for any past reporting violations based upon the client’s goals and objective. DUGGAN BERTSCH has successfully represented clients with foreign accounts before IRS criminal and civil investigators. We would welcome the opportunity to assist you with your needs.