The Form TD F 90-22.1 is commonly referred to as the foreign bank account report or “FBAR.” The FBAR is usually due on June 30th following the calendar year end. This year June 30th is on a Saturday so the FBAR for the calendar year 2011 is required to be received by the U.S. Treasury Department on or before June 29, 2012. The mailbox rule does not apply to the filing of the FBAR and an extension of the due date is not allowed. The mailbox rule means that U.S. federal income tax returns are considered to be filed based on the date of the postmark when the return is mailed, rather than the date when the IRS actually receives the return. The FBAR is not filed with the U.S. taxpayer’s federal tax return. See the instructions to the Form TD F 90-22.1 for the mailing address.
The penalties for the failure to properly file the FBAR include: (1) $10,000 for non-willful failure; (2) $100,000 or 50% of the account balance for willful failure; and (3) criminal penalties for willful failure. U.S. individuals are also required to file the Form 8938 with their U.S. federal individual income tax returns to report foreign bank and financial accounts. The FBAR is a separate filing requirement in addition to the Form 8938 and both forms must be filed. U.S. taxpayers may continue to disclose delinquent FBARs for prior years through the extended IRS Offshore Voluntary Disclosure program.
The FBAR is required to be filed if a U.S. person has a financial interest in or signature authority over a foreign financial account and the aggregate value of the U.S. person’s foreign accounts exceeds $10,000 (ten thousand U.S. dollars) at any time during the calendar year. The FBAR is required to be filed for zero balance foreign financial accounts if the aggregate value of the U.S. person’s foreign accounts exceeds $10,000.
The types of foreign accounts subject to reporting include: securities, brokerage, savings, demand, checking, deposit, time deposit or other account maintained with a financial institution. A U.S. person has a financial interest in a foreign financial account if the U.S. person is the owner of record or holder of legal title of the account. A U.S. person has signature authority over a foreign financial account if the U.S. person has the authority to control the disposition of the funds or assets in the account with a written or verbal communication to the financial institution that holds the account.
A U.S. person must file the FBAR if the U.S. person owns directly or indirectly more than 50% of a corporation, partnership, LLC, disregarded entity or trust which is the owner of record or holder of legal title of a foreign financial account. This means that the entity (corporation, partnership, LLC, disregarded entity or trust) must file the FBAR and the U.S. person who owns more than 50% of the entity also must file the FBAR. A U.S. person who owns less than 50% of the entity must file the FBAR if the U.S. person has signature authority over the foreign financial account. An entity such as a single member LLC which is a disregarded entity for federal tax purposes must file the FBAR in the name of the entity and the 100% owner also must file if the owner is a U.S. person.
The maximum value of the foreign financial account must be reported in U.S. dollars on the FBAR. If the foreign financial account is denominated in a foreign currency, the maximum account value for each account must be converted into U.S. dollars. The foreign currency must be converted using the U.S. Treasury Department’s Financial Management Service rate from the last day of the calendar year. Go to http://www.fms.treas.gov/intn.html to obtain the exchange rates in effect as of December 31, 2011.
For more information, please contact our international tax advisor at 301.231.6200.