If you do, you likely have an annual reporting obligation to the United States government. If you have not complied by filing Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts or FBAR) on annual basis, then you should consider disclosing under a temporary relief provision or the 2011 Voluntary Disclosure Initiative, both of which expire on August 31, 2011. The temporary relief offered is generous, especially to those who have reported all of their foreign income.
Who Must File FBARS?
Each U.S. person who has a financial interest in or signature authority over foreign financial accounts with a total aggregate value in excess of $10,000.00 must file an FBAR on an annual basis. FBARs must be filed even if the foreign accounts do not produce any offshore income. FBARs are due by June 30 for the preceding calendar year.
What if You Don’t File?
Penalties may apply. Non-willful violations could be as high as $10,000 per violation. If the failure to file is deemed willful, the penalty may not exceed the greater of $100,000 or 50% of the amount that was not disclosed. Criminal penalties might also apply.
If You Reported All of Your Income to the IRS (or Your Account Did Not Generate Income)
If you reported all of the income from your foreign bank account, or your foreign account did not generate any income, you may be able to cure your FBAR delinquency without being subject to civil or criminal penalties. To take advantage of the relief you must file your delinquent FBARs with an explanatory statement by August 31, 2011. However, your 2010 FBAR is due by June 30, 2011.
If You Failed to Disclose Income Related to Your Foreign Accounts
If you failed to report your income from the foreign account, then you should consider participating in the IRS’s 2011 Voluntary Disclosure Initiative. Reduced penalty rates of 5%, 12.5%, or 25% may apply, provided that you file amended income tax returns and pay all taxes, interest, and accuracy-related penalties associated with the unreported income. Also, taxpayers who participated in the IRS’s 2009 Initiative, which provided a 20% penalty, may wish to participate to qualify for the reduced rates provided by the 2011 Initiative.
The attorneys of Williams Coulson have successfully advised several clients on FBAR matters, including matters related to the 2011 Initiative. Please do not hesitate to contact Edward P. Wojnaroski, Jr., Stephen J. Pieklik or Brandon P. Smith to discuss any FBAR issues that you may have.