Foreign Financial Account Reporting

Individuals and businesses that own or have signature authority over one or more foreign financial accounts may be required to file Form TD F 90-22.1 “Report of Foreign Bank and Financial Accounts” by June 30^th of each year. This reporting requirement is not new, but is gaining additional attention due to greater mobility, increased foreign investment opportunities, and a growing emphasis on the global economy. The Government is also paying close attention to these reports as it looks for the proper reporting of income from off-shore accounts, and potential links to terrorist organizations.

This foreign bank and financial account report (often referred to as “FBAR”) is informational only, but should not be overlooked, as significant financial and/or criminal penalties can be imposed. In today’s economy the IRS is paying greater attention to these reports and may be less likely to abate financial penalties for the failure to comply.

A FBAR filing is required if the aggregate value of all foreign accounts exceeds $10,000. This determination is made by taking the greatest value of each account during the year, and adding them together. Once the $10,000 threshold is crossed, all foreign accounts must be reported. Common examples of situations where a FBAR may be required are as follows:

·         U.S. citizens who maintain a checking account in a foreign country that they may visit on a recurring basis

·         Foreign citizens who have moved to the U.S., but continue to maintain financial assets, retirement accounts or life insurance policies in their

          home country

·         Foreign citizens who are temporarily working in the U.S.

·         Individuals who have inherited a foreign account

·         Employees who have signature authority over a foreign account maintained by their employer

·         Owners of a foreign business

·         Businesses that have a subsidiary, branch or joint venture in a foreign country

·         Businesses that maintain foreign accounts in markets where they conduct significant business

·         Individuals or businesses that have invested in a foreign currency account for speculative or hedging purposes

If any of the above situations apply, or if you own or have signature authority over a foreign account for any other reason, you should consider whether you have a FBAR filing requirement. If a FBAR filing requirement exists for 2010, the report is due by June 30, 2011, so prompt action should be taken if it has not already been filed. 

This is an important tax filing that gets little attention and is often overlooked. However, it is a relatively easy report to prepare, and will not result in any additional tax liability (as long as the income from these accounts is already reported on the individual’s or businesses’ income tax return).  

Please let us know if you have any questions regarding the FBAR filing requirements or would like to discuss this further.