The Department of Treasury's Financial Crimes Enforcement Network (FinCEN) has issued an additional extension on the deadline to file a Report of Foreign Bank and Financial Accounts,better known as an FBAR. According to FinCEN, this new extension applies specifically to "officers or employees of investment advisors registered with the Securities and Exchange Commission."
The extension is intended to provide administrative relief to these advisors who have signature authority over the accounts but do not hold a direct financial interest. The extension applies to FBARs for the calendar year 2010 and 2009 or earlier if properly deferred.
This is not the first form of relief offered by FinCEN to those who failed to properly file an FBAR. In 2003, FinCEN agreed not to apply civil penalties to taxpayers for the failure to file a timely FBAR, and foreign residents who were unaware of their citizenship status in the United States were offered a five percent reduction in FBAR-related penalties in 2011.
These incentives were designed to encourage prompt disclosure of foreign accounts, thus helping the government identify persons who may be using foreign financial accounts to evade federal tax laws. As a result, certain individuals and organizations are legally required to disclose foreign financial accounts.
FBAR Criteria: Who is Required to File?
Any resident, citizen or entity in the United States must file an FBAR if they meet the following criteria:
- Financial interest in or signature authority over a foreign account
- Aggregate value of all foreign accounts is over $10,000
Steep civil and criminal penalties can apply if an FBAR was required but not filed. The penalties vary depending on whether the person in violation is found to have willfully or negligently failed to file the documents, but monetary penalties can range from $10,000 to $100,000 for each year that an FBAR was not filed.
There are a wide range of exceptions to the filing requirement, including IRA owners, foreign financial accounts owned jointly by spouses and trust beneficiaries. Determining whether a foreign financial account qualifies and efficiently disclosing it if necessary can be difficult.
If you have a foreign account and need to know whether or not you should have filed an FBAR, it is wise to seek the counsel of an experienced offshore tax issues attorney to help mitigate the risk of criminal and civil penalties.
