Tax News E-Alert

May, 2008

Foreign Financial Accounts Information Needs to Filed by June 30, 2008

Because of the increasingly international nature of investment and business activities, many U.S. residents and businesses are required to file a Report of Foreign Bank and Financial Accounts (TD F 90-22.1) with the U.S. Department of Treasury. Many overlook this filing requirement, which may result in civil penalties, criminal penalties, or both.

The TD F 90-22.1 report (often referred to as FBAR) is filed by each United States person that has a financial interest in, or signature authority or other authority over, a bank, securities or other financial accounts, in a foreign country, and the aggregate value of these accounts exceeds $10,000 any time during a calendar year.

The term "United States person" means a citizen or resident of the U.S., a domestic partnership, a domestic corporation, or a domestic estate or trust.

The information on the report may be used by any agency of the federal government such as the IRS, customs, FBI, DEA, etc.

Signature authority includes the ability to control the disposition of money or property in the foreign account by oral or written instructions to the signatory or titleholder on the account.

What Information Is Required?

The form requires taxpayer identification information (name, address, TIN, etc.) and the number of foreign financial accounts. For each financial account, the form requests a description of the type of account, the range of value in the account, the account number, the name of the institution, the country where the account is located and the name of the organization (corporation, partnership, trust or estate).    

When Is It Due?

This form is due on or before June 30th of the year following the calendar year of the taxpayer and must be filed on or before that date even if the taxpayer has an extension to file their tax return at a later date.

Penalties for Failing to File Form TD F 90-22.1

The TD F 90-22.1 Form states "Civil and criminal penalties, including in certain circumstances a fine of not more that $500,000 and imprisonment of not more than five years, are provided for a failure to file a report, supply information, and for filing a false or fraudulent report" and cites 31 Code of Federal Regulations (CFR) as the authority.  The instructions to the form also state that criminal penalties for failure to file a report or supply information or for filing a false or fraudulent report are authorized by 31 U.S. Code of Regulations (USC) 5322(b) and 18 USC 1001.

The American Jobs Creation Act of 2004 introduced a smaller penalty that does not require the government to prove a willful failure to file. According to the Statement of the Managers,

The bill adds an additional civil penalty that may be imposed on any person who violates this reporting requirement (without regard to willfulness). This new civil penalty is up to $10,000. The penalty may be waived if any income from the account was properly reported on the income tax return and there was reasonable cause for the failure to report.

Where Should It Be Filed?

The form should be sent to the U.S. Department of the Treasury, P.O. Box 32621, Detroit, MI  48232-0621.  This form is not to be filed with the filer's income tax return.

Please feel free to contact me at 310-697-1501 or rwelling@rwac.com if you have any questions or need assistance preparing form TD F 90-22.1

   Best regards,

   Richard Welling

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