FBARS Are Due June 30, Who Must File

more+
less-
more+
less-

The IRS recently released an FBAR Reference Guide, pertinent portions of which are reprinted below.

Who Must File the FBAR?

A United States person must file an FBAR if that person has a financial interest in or signature authority over any financial account(s) outside of the United States and the aggregate maximum value of the account(s) exceeds $10,000 at any time during the calendar year.

Who is a United States Person?

A “United States person” means:

-  A citizen or resident of the United States;
-  An entity created or organized in the United States or under the laws of the United States. The term “entity” includes but is not limited to, a corporation, partnership, and limited liability company;
- A trust formed under the laws of the United States; or
- An estate formed under the laws of the United States.

Financial Account

Financial account includes the following types of accounts:

- Bank accounts such as savings accounts, checking accounts, and time deposits,
- Securities accounts such as brokerage accounts and securities derivatives or other financial instruments accounts,
- Commodity futures or options accounts,
- Insurance policies with a cash value (such as a whole life insurance policy),
-  Mutual funds or similar pooled funds (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions),

Maximum Account Value

The maximum value of an account is a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year. Periodic account statements may be relied upon to determine the maximum value of the account, provided that the statements fairly reflect the maximum account value during the calendar year.

How to determine the maximum value of a foreign financial account: Determine the maximum account value in the currency of the account. After the maximum value of the account is determined, convert the maximum account value for each account into United States dollars using the exchange rate on the last day of the calendar year.

Financial Interest

A United States person has a financial interest in the following situations:

1. The United States person is the owner of record or holder of legal title, regardless of whether the account is maintained for benefit of the United States person or for the benefit of another person, including non-United States persons.
2. The owner of record or holder of legal title is a person acting as an agent, nominee, attorney, or a person acting on behalf of the United States person with respect to the account.
- Example: John is a United States citizen. His brother Paul maintains bank accounts in Mexico on behalf of John. The accounts are held in Paul’s name but Paul only accesses the accounts in accordance with his brother’s instructions. John has a financial interest in the Mexican bank accounts for FBAR reporting purposes. If his brother Paul is a United States citizen or resident, he also has an FB AR reporting requirement with respect to the accounts.

3. Signature Authority

Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account

4. Trust Beneficiaries

A trust beneficiary with a direct or indirect financial interest in more than 50 percent of the trust assets or income is not required to report the trust’s foreign financial accounts on an FBAR if the trust, trustee of the trust, or agent of the trust: (1) is a United States person; and (2) files an FBAR disclosing
the trust’s foreign financial accounts.

Recordkeeping.

Generally, records of accounts required to be reported on the FBAR should be kept for five years from the due date of the report, which is June 30 of the year following the calendar year being reported. The records should contain the following:
- Name maintained on each account.
- Number or other designation of the account.
- Name and address of the foreign bank or other person with whom the account is maintained.
- Type of account.
- Maximum value of each account during the reporting period.

Penalties

Failure to file an FBAR when required to do so may result in civil penalties, criminal penalties, or both.

The following chart highlights the civil and criminal penalties that may be asserted for not complying with the FBAR reporting and recordkeeping requirements.

Civil Penalties
Non-Willful Violation
Up to $10,000 for each negligent violation

Willful – Failure to File FBAR or retain records of account
Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.

Criminal Penalties.
Up to $250,000 or 5 years or both
Willful – Failure to File FBAR or retain records of account while violating certain other laws
Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.
Up to $500,000 or 10 years or both

Knowingly and Willfully Filing False FBAR

Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation.
$10,000 or 5 years or both

Civil and Criminal Penalties may be imposed together. 31 U.S.C. § 5321(d).

It is possible to assert civil penalties for FBAR violations in amounts that exceed the balance in the foreign financial account.

Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program is a way for taxpayers with delinquent FBARS and unreported income to come forward and minimize penalty exposure and risks of prosecution. For eligible taxpayers it should be considered.

Topics:  FBAR, IRS, Offshore Funds, Penalties

Published In: Criminal Law Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

Don't miss a thing! Build a custom news brief:

Read fresh new writing on compliance, cybersecurity, Dodd-Frank, whistleblowers, social media, hiring & firing, patent reform, the NLRB, Obamacare, the SEC…

…or whatever matters the most to you. Follow authors, firms, and topics on JD Supra.

Create your news brief now - it's free and easy »