Wednesday, June 22, 2011

Bellevue Tax Law | FBAR Filing Deadline is June 30th

June 30, 2011 is the filing deadline for your 2010 tax year Form TD F  90-22.1: Report of Foreign Bank and Financial Accounts (FBAR).  Unlike your regular taxes, the deadline is a received by date, not when the letter is postmarked.  That means that it must be received by the IRS on or before, June 30th, 2011.

This is a very simplified explanation of the filing requirements for the FBAR. Before you take the information in this article and go file I'd suggest you consult a tax professional. We can make sure it's done right.

Who needs to file this?
If you are a US person and have a foreign financial account, a financial interest or signature authority over foreign financial accounts that have an aggregate balance that exceeds $10,000 at any time during the year, you are required to file this form.  A foreign account is any account that is not located within the US.  This includes accounts in branches of US banks that are located on foreign soil.  Basically, an account is any type of bank account, securities account, brokerage account, some insurance policies with a cash value, and some credit card accounts.  The remaining part of this requirement can be broken down in to three parts: US person; financial interest; and signature authority or other power of disposition.

A US person is a US citizen located anywhere in the world, a US resident for tax purposes (a foreign person living in the US for work may have a requirement depending on tax treaties and days in the country), a business entity (Corporation, LLC, partnership, etc...)  or trust formed under the laws of any state in the United States.  Yes, that means if you are an US ex-pat living in some European country and opened a bank account that exceeds $10,000 you have a filing requirement.  This also means that if you own an interest in a US business that has a foreign bank account it will have to file the FBAR and possibly each of the owners of the business are required to file it, as well.

A person has a financial interest in a foreign financial account if she is an owner of the foreign account, an agent (through a power of attorney or something similar) over a person with a foreign financial account, or the owner of the account is a foreign entity (business, trust, or other foreign entity) and you directly own more than 50% of the entity.  For a foreign trust, if you are a grantor and an owner of any part of the trust, you have a financial interest and a filing requirement. 

Signatory authority or other power of disposition means that you do not have a financial interest in the foreign account, as described above, but you have a power to control the account in some way.  The most common example of this is: you are a partner in a foreign business and have a signature authority over the business' bank account (something as simple as an ATM card), but you do not own a 50% interest in the business.

Another example to look out for is: if you own a foreign retirement account and control the assets but cannot make withdrawals from the account.  Under this scenario, the IRS might decide you have a filing requirement through the power of disposition if you can make deposits to the account, control how the account is invested, but cannot make a withdraw because of the laws of the country where the account is located.

The penalties for not filing the FBAR are steep.  If you have any type of foreign account and do not think you are required to file; at least contact someone to verify that you are correct.
As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.  If you are unsure about whether you have a requirement to file this form contact a tax professional.

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