The annual deadline for filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR” form) is fast approaching. Any U.S. taxpayer with a financial interest in, or signature or other authority over, a foreign bank account (which includes bank, security and other types of financial accounts, including certain foreign life insurance policies) is required to file the FBAR form if the aggregate value of the account (or accounts) exceeded $10,000 at any time during the 2012 calendar year, subject to certain exceptions. The FBAR filing requirements apply to all types of taxpayers with offshore bank accounts, including individuals, corporations, partnerships, LLCs, trusts, and estates (with some exceptions). Corporate officers with signature authority over corporate bank accounts located in a foreign country must also file the FBAR form in their individual capacity.
The FBAR filing deadline is normally June 30, but because June 30 falls on a Sunday this year, the actual deadline is Friday, June 28, 2013. No extensions of time to file the FBAR are available and it is considered timely filed only when it is actually received by the Treasury Department’s service center located in Detroit, Michigan, and not when it is mailed. At present, the FBAR may be filed either in paper form or electronically through the Treasury Department’s BSA E-Filing System. Significant criminal and civil penalties may be imposed for the failure to timely file the FBAR form.
In addition, the Foreign Account Tax Compliance Act (FATCA) now requires individuals to report certain foreign assets (including foreign bank accounts, stock, securities, financial instruments, and contracts) on a new Form 8938, Statement of Specified Foreign Financial Assets, if the total value of those assets exceeds certain specified thresholds. Form 8938 must be filed annually with an individual’s tax returns and, importantly, the filing of Form 8938 does not relieve a taxpayer of his or her FBAR filing obligations.
Taxpayers who are not compliant with their prior year FBAR or income tax filing obligations may wish to take advantage of the Internal Revenue Service’s Offshore Voluntary Disclosure Program (OVDP), an amnesty program designed to encourage U.S. taxpayers with undisclosed foreign bank accounts to come into compliance with U.S. tax laws and avoid criminal prosecution. This program permits eligible taxpayers with undisclosed foreign bank accounts, and unreported income associated with those accounts, to avoid criminal prosecution in return for the payment of back taxes, interest, and penalties. To date, nearly 40,000 U.S. taxpayers have taken advantage of the offshore voluntary disclosure programs offered by the IRS since 2009. Currently, there is no deadline for participation in the OVDP, although the IRS has stated that it could end the program, or modify its terms, at any time.
Individuals with questions about FBAR or FATCA reporting, or who are considering making a voluntary disclosure to the IRS regarding foreign bank accounts, should consult experienced tax counsel to understand the benefits and risks of the voluntary disclosure process. Blank Rome’s FBAR and FATCA compliance team has significant experience with offshore reporting obligations and the IRS voluntary disclosure programs and can assist individuals in navigating these reporting regimes.