In an effort to bring more off-shore money back into the United States tax system, the Treasury Department has increased reporting requirements for anyone with at least signature authority over a foreign bank account, and the penalties for ignoring those requirements are severe.
If you have a financial interest in (or signature authority over) foreign accounts that were worth at least $10,000 at any point since 2003, you are required to file the appropriate form by June 30 – even if you collected little or no interest on the accounts. The penalty for failing to file could be as much as 25 percent of the value of the accounts.
Certain foreign hedge funds, private equity funds and other commingled funds may be exempt from these reporting requirements.
The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) recently released final regulations on Foreign Bank Account Reporting (FBAR), and it defines “signature authority” as a person who “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.”
The FBAR requirements are retroactive to 2003. The IRS is currently allowing taxpayers to voluntarily report any such foreign accounts from 2003 through 2009 – and pay back-taxes, interest and a reduced penalty – by August 31 or risk criminal prosecution.
“As I’ve said all along, the goal is to get people back into the U.S. tax system,” IRS Commissioner Doug Shulman said in a press release last month. “Combating international tax evasion is a top priority for the IRS. … The situation will just get worse in the months ahead for those hiding assets and income offshore.”
Barring further regulations, any time your foreign accounts are worth at least $10,000 combined, you will be required to file an FBAR report by June 30 of the following calendar year. All such returns must be received (not postmarked) by June 30, regardless of when a company’s fiscal year ends.
For more information, contact a Barnes Dennig representative at (513) 241-8313.