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New Form TD F 90-22.1 

(FBAR) Regulations and filing option

Final Regulations related to Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”), were issued on February 24, 2011. The final regulations did not materially change the proposed regulations regulating the filing requirements of the FBAR. However, the proposed regulation did make a number of “clarifications” to existing law.

United States persons are generally required to file an FBAR, subject to certain narrow exceptions, if:

  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

United States person means: United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Generally, each U.S. citizen who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts (e.g. a foreign life insurance policy with a cash value feature) in a foreign country that in the aggregate exceeds $10,000 at any time during the calendar year must file a FBAR for the calendar year.

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. Checking the appropriate block on FBAR-related federal tax return or information return questions (for example, on Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120) and filing the FBAR, satisfies the account holder’s reporting obligation.

The FBAR is not filed with the filer’s federal income tax return. The FBAR must be received by the IRS on or before June 30 of the year following the calendar year being reported at a specified processing address. An extension of time to file a FBAR is not available. The granting by the IRS of an extension to file federal income tax returns does not extend the due date for filing an FBAR.

If you fail to file an FBAR, in the absence of reasonable cause, you may be subject to either a willful or non-willful civil penalty and possible criminal prosecution and penalties. Penalties for willfully failing to file an FBAR can be up to the greater of $500,000 or 50 percent of the total balance of the foreign account at the time of the violation per year.

An announcement was made on July 18, 2011 that an electronic filing system was developed to accept the FBAR form. Electronic filers will receive an acknowledgement of each submission, which is noteworthy given the FBAR’s strict filing deadline and enormous penalties for noncompliance.

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