Wednesday, June 22, 2011

Fincen Gives Certain Employees And Officers Of An Investment Advisor Extra Time To File FBARs

FinCEN Notice 2011-2

Treasury's Financial Crimes Enforcement Network (FinCEN) has announced in a Notice that certain employees and officers of an investment advisor with only signature authority over certain foreign financial accounts, who are required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) with respect to those accounts, will have a one-year extension beyond the upcoming filing date of June 30, 2011. Thus, FinCEN Notice 2011-2 extends the deadline until June 30, 2012.

Background. Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing TD F 90-22.1 with the Department of the Treasury on or before June 30th of the succeeding year.

In Notice 2009-62, 2009-35 IRB 260, IRS extended the deadline to June 30, 2010, to file a FBAR for years 2008 and earlier, for (i) persons with no financial interest in a foreign financial account but with signature or other authority over that account; and (ii) persons with a financial interest in or signature authority over a foreign financial account in which the assets are held in a commingled fund.

In Notice 2010-23, 2010-11 IRB 441, which modified and supplemented Notice 2009-62, IRS deferred the deadline for persons with signature authority over, but no financial interest in, a foreign financial account for which a FBAR would otherwise have been due on June 30, 2010, until June 30, 2011. This deadline applied to FBARs reporting foreign financial accounts for the 2010 and prior calendar years. Both of these extensions were provided to give Treasury more the time to develop comprehensive FBAR guidance.

On Feb. 24, 2011, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued a final rule to amend the Bank Secrecy Act (BSA) regs regarding FBAR reporting requirements. The rule was made effective as of Mar. 28, 2011 and applies to 2010 reports required to be filed by June 30, 2011, and those for subsequent years. It largely adopted the proposed regs issued on Feb. 26, 2010, which provided additional guidance and clarification regarding who must file FBARs.

Deadline deferred. In FinCEN's Notice 2011-2, the deadline for filing FBAR forms is extended to June 30, 2012 for an employee or officer of an investment advisor registered with the Securities and Exchange Commission who has signature or other authority over, and no financial interest in, a foreign financial account of persons that are not investment companies registered under the Investment Company Act of 1940. Notice 2011-2 supplements FinCEN Notice 2011-1, which gave certain individuals with only signature authority until June 30, 2012, to file FBARs.

The extension is applicable to FBARs for calendar year 2010 and FBARs for calendar year 2009 or earlier calendar years for which the deadline was properly deferred under Notice 2009-62 or Notice 2010-23.

Observation: In Notice 2011-54, 2011-29 IRB (see ¶14), in response to comments that individuals with signature authority over, but no financial interest in, foreign financial accounts were having difficulty gathering the necessary information to file complete and accurate FBARs for 2009 and earlier calendar years by the June 30, 2011, deadline, IRS pushed the deadline back to Nov. 1, 2011. However, the June 30, 2011, deadline for reporting either signature authority over, or financial interest in, foreign financial accounts for the 2010 year remained unchanged. IRS specified that the relief provided in Notice 2011-54, didn't limit the relief provided in FinCEN's Notice 2011-1.

References: For foreign financial accounts reporting requirements, see FTC 2d/FIN ¶S-3650; United States Tax Reporter ¶60,114.06; TaxDesk ¶815,516; TG ¶60611.

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