The Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (the “FBAR”), is an IRS form used to track the international flow of money in and out of the US.
The FBAR must be “received” by the Department of the Treasury (“Treasury”) on or before June 30th of the year immediately following the calendar year being reported. Unlike other IRS forms, timely mailing, sending with a June 30th postmark, is not timely filing. Accordingly, the FBAR must be “received” by the Treasury on June 30th, 2013. The FBAR due date cannot be extended.
Who Must File the FBAR?
Generally speaking, a United States person (“US person”) is required to file Form TD F 90-22.1 with the Treasury to report the existence of a financial interest in, or signature authority over, foreign financial accounts if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
A US person is a broad definition that includes a citizen, could be residing abroad, or resident of the United States, a domestic partnership, a domestic corporation, and a domestic estate or trust. An individual is a U.S. resident if he meets either of the following tests:
1) Green-Card Test – Individuals who at any time during the calendar year have been lawfully granted the privilege of residing permanently in the U.S.
2) Substantial-Presence Test- Individuals who do not pass the Green Card Test are nevertheless resident aliens if they are physically present in the U.S. for at least 183 days during the current year, or they are physically present in the U.S. for at least 31 days during the current year and meet the specifications contained in IRC § 7701(b) (3).
In sum, whether you are here legally and illegally, you are required to file the FBAR. If you are a US citizen living overseas, you are required to file the FBAR.
Financial Interest in an Account in a Foreign Country
A U.S. person has a financial interest in a foreign country if the person is the owner of record or holder of legal title, or if another person holds title for his benefit (agent, nominee, attorney or in some other capacity on behalf of a U.S. person). A US person also has a financial interest if the U.S. person (a) owns directly or indirectly more than 50 percent of the total value of the shares of stock or more than 50 percent of the voting power for all shares of stock of a corporation; (b) owns a partnership interest in more than 50 percent of the profits (distributive share of income) or more than 50 percent of the capital of the partnership; or (c) owns a present beneficial interest in a trust in more than 50 percent of the assets or from which such person receives more than 50 percent of the income.
A U.S. person has signature authority if that person can control the disposition of money or other property in the account by delivery of a document containing his signature to the bank or other person with whom the account is maintained.
Aggregate Value Exceeds $10,000.00
If at any time during the year, it could be for a day, the aggregate value of your foreign accounts exceed $10,000.00, then you must file the FBAR
There are many penalties ranging from civil penalties to criminal penalties for the failure to file FBAR(s). The penalties can include the following:
Negligent FBAR Violation– up to $500.00 per violation
Non-Willful FBAR Violation– up to $10,000.00 per violation
Willful Failure to File FBAR – up to the greater of $100,000 or 50% of the amount in the account at the time of the violation. Additionally, a prison term of up to ten years and criminal penalties of up to $500,000.
In addition to the foregoing penalties, possible criminal charges related to tax returns, including, tax evasion and filing a false return can be applicable.
Failed to File FBAR Help (Offshore Voluntary Disclosure Initiative Program (OVDI)
Prior to 2008, the IRS did little to enforce the filing of FBAR(s). Since 2008, the IRS’ international tax enforcement has been rampant. If you have failed to file FBAR(s), you must consider the IRS’ Offshore Voluntary Disclosure Initiative Program (“OVDI”). OVDI is a way to avoid criminal tax exposure from undisclosed foreign accounts.
At the Law Offices of Todd S. Unger, Esq. LLC, we can help counsel you through the IRS’ Voluntary Disclosure Program. If you are not sure whether or not OVDI is right for you, simply contact us. We can help you decide what may be the best plan of action to resolve your tax matter today.