Reporting Requirements for Americans with Foreign Financial Accounts

US expats and foreign account holders take notice.

If you are a US person who has a financial interest or signature authority over foreign bank accounts, securities accounts, and/or other financial accounts you must file a Treasury Form TD F 90-22.1 (FBAR) for each year in which the aggregate value of the accounts exceeds US$10,000. The FBAR is due and must be RECEIVED by June 30th following the year for which it applies. Postmarked by June 30th is not sufficient and is considered late.

Just in case you were not aware, the penalties for failure to file an FBAR are onerous and some of the largest in our banking code.

The civil penalties for a non-willful violation may not exceed $10,000 per violation. Civil penalties for a willful violation may not exceed the greater of $100,000 or 50% of the amount in the account at the time of the violation. The criminal penalty for willful violations is a fine of not more than $250,000, or imprisonment for not more than five years, or both.

It is very important to know that the IRS takes a very aggressive position on determining "willfulness." The mere oversight of not marking "yes" at the bottom of your Schedule B with your Form 1040 is grounds for willfulness in the eyes of the IRS. Just review the 2012 Appellant Court Decision in the unpublished tax case of United States vs. J. Bryan Williams, and you will understand the concern this case causes for taxpayers.

Additionally, individuals who, for any tax year beginning after March 18, 2010 hold an interest in a specified foreign financial asset, must attach to their income tax return for that tax year the required information for each specified foreign financial asset if the aggregate value ofall the individual's specified foreign financial assets exceeds $50,000 ($100,000 Married Filing Joint) or a dollar amount higher than $50,000 as the IRS may prescribe.This is a separate filing from the FBAR and is more inclusive of assets not covered under the FBAR.

Specified foreign financial assets include financial accounts maintained by foreign financial institutions and other assets not held in accounts maintained by financial institutions, such as stock or securities issued by non-US persons, financial instruments or contracts with issuers or counterparties that are non-US persons, and interests in certain foreign entities.

The penalty for failing to report specified foreign financial assets for a tax year is $10,000. However, if this failure continues for more than 90 days after the day on which the IRS mails notice of the failure to the individual, additional penalties will be incurred of $10,000 for each 30-day period (or fraction of the 30-day period) during which the failure continues after the expiration of the 90-day period, with a maximum penalty of $50,000.

The IRS has: (1) announced that the annual reports will be filed on IRS Form 8938, which will have to be attached to the individual's income tax return for the tax year, and (2) suspended the filing obligation for individuals who have to file an income tax return for a tax year before IRS releases IRS Form 8938. However, the IRS Form 8938 for the suspended years will have to be attached to the individual's next income tax return that has to be filed with the IRS.

If you need to file, or are uncertain whether you are, or will be, required to file, a Treasury FBAR or an IRS Form 8938 for the current year or for a past year, you should contact an international tax CPA immediately and have them guide you through these complex rules.

Ryan Losi, CPA, is Executive Vice President at PIASCIK. He is an international tax specialist who helps American expats manage their financial and reporting requirements back home.

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