Investors with offshore accounts must be familiar with the filing requirements of the FBAR and IRS Form 8938.
Any U.S person with offshore accounts that had more than $10,000 in them any time during the year must file Form TD F 90-22.1, the so-called FBAR (Report of Foreign Bank and Financial Account). A U.S. person includes individuals, partnerships, corporations and estates and trusts. This form must be received (not postmarked) by the U.S. Treasury Department by June 30, 2012. There is no extension of time to file this report. Unlike individual income tax returns, this form can’t be filed electronically. It must be mailed in. Failure to file this report on time may result in penalties being assessed. Civil penalties start at $10,000 and go up from there.
IRS Form 8938
The IRS came out with a new income tax form this past year, Form 8938, Statement of Specified Foreign Asset. Unlike the FBAR, this form is filed with your individual federal income tax return, form 1040.
This form is required for a married couple filing a joint return if the value of the foreign asset was $100,000 on the last day of the year or $150,000 at any point during the year. For single taxpayers these amounts are half of this, $50,000 and $75,000 respectively. Some foreign assets may be difficult to value. If this is the case an extension to file the individual income tax return should have been filed. This will allow until October 15, 2012 to file the 2011 return.
The penalty for failure to file this form starts at $10,000 and is a maximum of $50,000.
The federal government has gotten very serious about investors complying with disclosing offshore accounts.
Will they eliminate the FBAR in the future? Perhaps, much of the information required is similar. The threshold for filing the FBAR is much lower however. For now however investors with offshore accounts may need to file both.
ACTION ITEM: Investors with offshore accounts must be familiar with the requirements to file the FBAR and IRS Form 8938.
Thomas F. Scanlon, CPA, CFP®