WHAT IS MY DEADLINE FOR FILING?
If you are a U.S. Citizen, Green Card Holder, Certified Resident or certain business entities of the U.S. for U.S. tax purposes then the filing obligation of Federal form 90-22.1 may be looming for you. There is a two-prong test to see if you need to file this form:
- You had a financial interest in or signature authority over at least one financial account located outside of the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
Specifically, United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Now there are exceptions to the reporting requirement, which are:
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over but no financial interest in a foreign financial account;
- Trust beneficiaries; and
- Foreign financial accounts maintained on a United States military banking facility.
Reporting and Filing Information
A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.
The FBAR is not filed with the filer’s federal income tax return. The granting, by the IRS, of an extension to file federal income tax returns does not extend the due date for filing an FBAR. You may not request an extension for filing the FBAR. The FBAR must be received by the IRS on or before June 30 of the year following the calendar year being reported.
File by mailing the FBAR to:
United States Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621.
If an express delivery service is used, file by mailing to:
IRS Enterprise Computing Center
ATTN: CTR Operations Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Delivery messenger service contact telephone number: (313) 234-1062.
Account holders who do not comply with the FBAR reporting requirements may be subject to civil penalties, criminal penalties, or both.
Electronic Filing for FBAR Forms
On July 18, 2011, FinCEN announced that it has developed an electronic filing system that will accept the FBAR form. E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about FBAR e-filing, you should contact your tax attorney or accountant.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
There has been a lot of controversy and/or confusion that individuals with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The new Form 8938 filing requirement does not replace or otherwise affect an individual’s requirement to file FBAR. Please look at the chart provided below to help in clarifying this filing and reporting requirement:
The new Form 8938 filing requirement does not replace or otherwise affect an individual’s obligation to file Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts). Individuals must file each form for which they meet the relevant reporting threshold.
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Form 8938, Statement of Specified Foreign Financial Assets
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Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)
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Who Must File?
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Specified individuals, which include U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold |
U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold |
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Does the United States include U.S. territories?
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No |
Yes, resident aliens of U.S territories and U.S. territory entities are subject to FBAR reporting |
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Reporting Threshold (Total Value of Assets)
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$50,000 on the last day of the tax year or $75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad) |
$10,000 at any time during the calendar year |
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When do you have an interest in an account or asset?
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If any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset are or would be required to be reported, included, or otherwise reflected on your income tax return |
Financial interest: you are the owner of record or holder of legal title; the owner of record or holder of legal title is your agent or representative; you have a sufficient interest in the entity that is the owner of record or holder of legal title.Signature authority: you have authority to control the disposition of the assets in the account by direct communication with the financial institution maintaining the account.See instructions for further details. |
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What is Reported?
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Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets |
Maximum value of financial accounts maintained by a financial institution physically located in a foreign country |
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How are maximum account or asset values determined and reported?
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Fair market value in U.S. dollars in accord with the Form 8938 instructions for each account and asset reportedConvert to U.S. dollars using the end of the taxable year exchange rate and report in U.S. dollars. |
Use periodic account statements to determine the maximum value in the currency of the account.Convert to U.S. dollars using the end of the calendar year exchange rate and report in U.S. dollars. |
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When Due?
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By due date, including extension, if any, for income tax return |
Received by June 30 (no extensions of time granted) |
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Where to File?
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File with income tax return pursuant to instructions for filing the return |
Mail to:Department of the Treasury
Post Office Box 32621
Detroit, MI 48232-0621For express mail to:IRS Enterprise Computing Center
ATTN: CTR Operations
Mailroom, 4th Floor
985 Michigan Avenue
Detroit, MI 48226
Certain individuals may file electronically at BSA E-Filing System |
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Penalties
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Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply |
If non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply |
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Types of Foreign Assets and Whether They are Reportable
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Financial (deposit and custodial) accounts held at foreign financial institutions
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Yes |
Yes |
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Financial account held at a foreign branch of a U.S. financial institution
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No |
Yes |
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Financial account held at a U.S. branch of a foreign financial institution
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No |
No |
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Foreign financial account for which you have signature authority
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No, unless you otherwise have an interest in the account as described above |
Yes, subject to exceptions |
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Foreign stock or securities held in a financial account at a foreign financial institution
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The account itself is subject to reporting, but the contents of the account do not have to be separately reported |
The account itself is subject to reporting, but the contents of the account do not have to be separately reported |
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Foreign stock or securities not held in a financial account
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Yes |
No |
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Foreign partnership interests
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Yes |
No |
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Indirect interests in foreign financial assets through an entity
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No |
Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail. |
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Foreign mutual funds
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Yes |
Yes |
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Domestic mutual fund investing in foreign stocks and securities
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No |
No |
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Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor
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Yes, as to both foreign accounts and foreign non-account investment assets |
Yes, as to foreign accounts |
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Foreign-issued life insurance or annuity contract with a cash-value
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Yes |
Yes |
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Foreign hedge funds and foreign private equity funds
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Yes |
No |
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Foreign real estate held directly
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No |
No |
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Foreign real estate held through a foreign entity
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No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate |
No |
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Foreign currency held directly
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No |
No |
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Precious Metals held directly
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No |
No |
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Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles
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No |
No |
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‘Social Security’- type program benefits provided by a foreign government
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No |
No |
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CONCLUSION:
If you have any questions on this imperative and mandatory filing, either 90-22.1 or 8938, you should immediately seek the tax advice of a qualified international tax lawyer or accountant. Remember, this deadline is fixed, June 30, 2012 for the 2011 tax year.
