The Report of Foreign Bank and Financial Accounts Form TD F 90-22.1 ("FBAR") is due June 30, 2011. This form must be filed by a United States person with a financial interest in or signature authority over a foreign financial account if the total value of all of the accounts exceeded $10,000 at any time during the year. This form is merely an information form. There is no tax due with this return.
This form must be received on or before June 30, 2011. There is no extension of time to file this return. Even if your individual income tax return is on extension, it doesn't matter. Please note it must be received by June 30, 2011, not postmarked. File this form with the Treasury Department, not the Internal Revenue Service. Unlike income tax returns, this form cannot be filed electronically. It must be mailed in. Caution should be exercised to assure the form arrives by the due date. As with other returns and forms, it is recommended that you send it “Certified Mail, Return Receipt Requested”.
To get started, look at your 2010 tax return. On your 2010 individual income tax return, Schedule B, Interest and Ordinary Dividends, Part III asks two basic questions:
- At any time during 2010, 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?
- If "Yes," enter the name of the foreign country.
If the answer is yes and the combined value of all of the foreign accounts was $10,000 or less for the entire year, you don't need to do anything else. If you don't meet this exception, you will need to file an FBAR.
Failure to file the FBAR can result in civil penalties, criminal penalties, or both. Civil penalties start at $10,000 for non-willful violations to the greater of $100,000 or one-half of the account value per year for willful violations.
The IRS is currently running a so-called "Offshore Voluntary Disclosure Initiative." This allows taxpayers until August 31, 2011 to file any back FBARS. This is essentially an amnesty program where the penalty is 25% of the highest value of the account between 2003 and 2010. Taxpayers that enter this program must submit all originally filed returns and amended returns detailing the type of previously unreported income from 2003 through 2010. All of the income tax, interest and penalties assessed must be paid with these filings. They must also file all of the FBARS for this time period.
ACTION ITEM: If you are required to file an FBAR, don't delay. There is no extension of time to file this document. The penalties for failure to file are huge.
Thomas F. Scanlon, CPA, CFP®