Foreign Bank account Reporting Information Returns
Report of Foreign Bank and Financial Accounts (FBAR)
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.
Recent FBAR Guidance On February 24, 2011, the Treasury Department published final regulations amending the FBAR regulations. These regulations became effective March 28, 2011, and apply to FBARs required to be filed with respect to foreign financial accounts maintained in calendar year 2010 and for FBARs required to be filed with respect to all subsequent calendar years. The FBAR form and instructions (PDF) have been revised to reflect the amendments made by the final regulations.
On May 31, 2011, the Financial Crimes Enforcement Network (FinCEN) issued FinCEN Notice 2011-1 (PDF), revised June 6, 2011, to provide administrative relief for certain individuals with signature authority over but no financial interest in foreign financial accounts. The deadline to report signature authority has been extended to June 30, 2012, for the following individuals:
an employee or officer of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of a controlled person of the entity; or an employee or officer of a controlled person of an entity under 31 CFR § 1010.350(f)(2)(i)-(v) who has signature or other authority over and no financial interest in a foreign financial account of the entity, the controlled person, or another controlled person of the entity.
For purposes of FinCEN Notice 2011-1, a controlled person is a United States or foreign entity more than 50 percent owned (directly or indirectly) by an entity under 31 CFR § 1010.350(f)(2)(i)-(v).
On June 16, 2011, the IRS issued Notice 2011-54 to provide additional administrative relief for individuals with signature authority but no financial interest whose filing requirements were properly deferred under Notice 2009-62 or Notice 2010-23. The deadline to file the FBAR for these individuals was extended until November 1, 2011. This extension only applies to reports for the 2009 or earlier calendar years. This Notice did NOT extend the reporting deadline for calendar year 2010.
On June 17, 2011, FinCEN issued Notice 2011-2 (PDF) to facilitate more accurate compliance with FBAR filing requirements. Notice 2011-2 was issued to provide administrative relief for certain officers or employees of investment advisors registered with the Securities and Exchange Commission who have signature or other authority but no financial interest in certain foreign financial accounts. The deadline to file an FBAR has been extended to June 30, 2012, for those specified individuals working for advisors registered with the Securities and Exchange Commission.
Who Must File an FBAR United States persons are required to file an FBAR if:
The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Exceptions to the Reporting Requirement Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
Certain foreign financial accounts jointly owned by spouses; United States persons included in a consolidated FBAR;
Correspondent/nostro accounts; Foreign financial accounts owned by a governmental entity; Foreign financial accounts owned by an international financial institution;
IRA owners and beneficiaries; Participants in and beneficiaries of tax-qualified retirement plans; Certain individuals with signature authority over but no financial interest in a foreign financial account; Trust beneficiaries; and Foreign financial accounts maintained on a United States military banking facility. Look to the FBAR instructions to determine eligibility for an exception and to review exception requirements.
Reporting and Filing Information A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.