Taxpayers with foreign accounts have come under fire from the U.S. Government. Apparently, some people had foreign accounts and they, um…didn't declare the income. Yikes!
The UBS case has gotten a lot of attention. They have been sued to turn over information on an estimated 52,000 accounts valued at approximately $15 billion. Some taxpayers have now pleaded guilty and face both jail time and fines.
What do you need to do? Well, let's start with your federal income tax return. On Schedule B, Interest and Ordinary Dividends, Part III, two basic questions are asked:
a. At any time during 2009, did you have an interest in or a signature or other authority over a financial account in a foreign country, such as a bank account, securities account, or other financial account?
b. If yes, enter the name of the foreign country.
If the answer is yes and the combined value of the accounts was $10,000 or less for the whole year, you don't need to do anything else. If you do not meet this or a few other very limited exceptions, you will need to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
This form needs to be filed with the U.S. Department of the Treasury on or before June 30th. Oh yes, if you fail to file this report, there is a penalty. This is per the instructions on the form. "Disclosure of this information is mandatory. Civil and criminal penalties, including in certain circumstances a fine of not more than $500,000 and imprisonment of not more than five years, are provided for failure to file a report, supply information, and for filing a false or fraudulent report. Disclosure of the Social Security number is mandatory."
ACTION ITEM: If you have foreign accounts and are required to file Form TD F 90-22.1, file on time. Failure to file this document can become a very expensive proposition.
Thomas F. Scanlon, CPA, CFP®