Friday, July 1, 2011

IRS Reminds Taxpayers Of June 30 FBAR Deadline; Stresses Penalties For Noncompliance

IR 2011-70

In a news release, IRS has reminded taxpayers of the pending June 30th deadline for individuals who either have a bank or other financial account in a foreign country, or who have signature authority over such an account, to file Form TD F 90-22.1, Report of Foreign Bank and Foreign Accounts (FBAR) for the 2010 tax year.

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 30, of the succeeding year.

In Notice 2010-23, 2010-11 IRB 441, 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. Thus, the June 30, 2011, deadline applied to FBARs reporting foreign financial accounts for the 2010 and prior calendar years.

In Notice 2011-54, 2011-29 IRB, the deadline was further deferred for individuals who have signature authority over, but no financial interest in, foreign financial accounts, to file FBARs for pre-2010 years. They now have until Nov. 1, 2011, to report their signature authority over such accounts for 2009 and earlier years. The deadline for 2010, however, remains unchanged at June 30, 2011.

The June 30, 2011, deadline was also further extended for certain employees and officers of an investment advisor registered with the Securities and Exchange Commission who have 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. These individuals now have until June 30, 2012, to file FBARs.

New reminder. In IR 2011-70, IRS reminded taxpayers of the pending June 30th due date for everyone who either has a bank or other financial account in a foreign country, or who has signature authority over such an account (except financial professionals subject to the June 30, 2012, deadline), to file an FBAR for 2010.

IRS cautioned taxpayers that they may be subject to the FBAR filing requirements, even if their foreign accounts don't generate any taxable income.

Penalties for noncompliance. IRS warned taxpayers that the civil and criminal penalties for noncompliance with the FBAR filing requirements are significant. Civil penalties for a non-willful violation can range up to $10,000 per violation, and civil penalties for a willful violation can range up to the greater of $100,000 or 50% of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together.

Taxpayers who were required but failed to file FBARs for earlier years are instructed to file the delinquent reports and attach a statement explaining why that are late. If IRS determines that the late filings were due to reasonable cause, no penalty will be asserted.

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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