I.R.S. CREATES TAXPAYER CONFUSION ON DUE DATES
Form TD F 90-22.1 REPORT OF FOREIGN BANK AND FINANICAL ACCOUNTS (“FBAR”)
This I.R.S. assumes taxpayers and tax advisors have a duty to search for complex revised FAQs hidden deep in their website and
digest the information, advise our clients and take action within a week before a filing deadline…all under the threat of large penalties.
In addition, clients misinterpret the rules – easy to do -- and now assume they get a no risk extension of time to file. Who can blame the taxpayer when
they are faced with a complex form, instructions, I.R.S. guidance as 28 FAQs from the past, and additional FAQs that are part of a separate
procedure for tax evaders with unreported offshore income!
I am signed up for 5 different email alerts from the I.R.S. I received nothing on this issue until I saw it in the Wall Street Journal and went searching their website for FAQ #43 and #9 below.
The I.R.S. forgets, in their Ivory Tower, that the rest of us have real lives to lead and can’t search the same issue over and over again just to
make sure nothing has changed. What a way to run a tax system!
UPDATE 6/27/09 – follow-up to original blog below (where you see my cartoon).
PLEASE DO NOT ASSUME THAT, BELOW, AN EXTENSION OF THE DUE DATE IS
ALLOWED FOR EVERYONE….as some of our clients have thought!
I recommend you try to file on time (needs to be received) by June 30, 2009 if at all possible.
1) If you did not report and pay your tax on the income from the Foreign Bank Account, if required, you don’t qualify for
the FBAR EXTENSION AFTER JUNE 30, 2009 to SEPTEMBER 23, 2009, at all.
If your income tax return for 2008 is on valid extension, that counts as timely reporting and paying your tax for 2008, even though your return
is not yet filed, as long as you ultimately file – hopefully by the income tax return extension due date – and report the income, and pay all the tax in a timely
2) If you did report and pay tax on the income from the Foreign Bank Account, if required, you have to attach a statement
to the FBAR Form providing some explanation why the form is late and send a copy to the IRS office in Philadelphia, PA.
If you knew about the FBAR requirement prior to a recent June 12th rule change, but just couldn’t get the information together, that is NOT an excuse
for which the extension is allowed. File absolutely as soon as possible to put yourself in a better position to negotiate any penalties that may
3) If you truly “only recently learned of their FBAR filing obligation and have insufficient time to
gather the necessary information to complete the FBAR” and reported all your income as required and paid all your tax, the FBAR extension
will apply with no penalties if you file by September 23rd as instructed in #9, below. But I still urge you to file as soon as possible and not
stretch it out to September 23rd.
4) If you filed a FBAR in 2008, it is illogical to say you didn’t know to file in 2009 by the June 30th due date for the same accounts. We assume the IRS will check their computer records to see if you knew to file in
the prior year.
Possible Penalty Trap!!
5) If you did not file FBARs for prior years and had a responsibility to file under old or new interpretations, we recommend you immediately
follow #9, below, to file for the last 6 unfiled years. Otherwise, by filing now for 2008, it is clear you NOW know you need to file, and after September
23, 2009, you will have “willfully” (i.e., intentionally) not filed the prior year FBARs within the amnesty time-window provided to September 23rd, exposing you to the $10,000
Non-willful or $100,000 Willful penalties for non-filing!!!…and may need to someday talk your way out of those penalties, with a good attorney, if that is even possible.
If you also did not report the income from those accounts and were required to, be very careful what you file and call a tax attorney to discuss the IRS Voluntary Disclosure program right away so that
you can make all required filings absolutely as soon as possible in a way that minimizes your exposure to penalties. SEE: http://www.groco.com/readingroom/tax_unreported_offshore_income.aspx
for important information on the Voluntary Disclosure program and please be advised, this is NOT a “do-it-yourself” project. Get some professional assistance to protect yourself.
Foreign Bank Account Reporting is Due June 30, 2009
By Ron Cohen, CPA, MST
Greenstein, Rogoff, Olsen & Co., LLP
The I.R.S. has warned they will take this filing deadline more seriously than in the past and impose penalties on late or non-filers. PLEASE TAKE THIS SERIOUSLY!
Form TD F 90-22.1 (Report of foreign Bank and Financial Accounts, commonly known as an “FBAR”).
Who Must File this Report. Each United States person 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, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing this report with the Department of the Treasury on or before June 30, of the succeeding year.
FBAR Filings Must Be Received by June 30.
Unlike the rule for tax forms, FBAR forms are deemed filed when received by the IRS, not when postmarked. (As a result, use of certified mail with return receipt requested is recommended.) No extension of time to file is granted.
1) Penalties for failure to comply with the Bank Security Act requirement that United States persons report their financial interest in, or authority over, financial accounts located in a foreign country.
U.S. citizens, residents, and certain other persons, must annually report their financial interest in, or signature authority (or other authority that is comparable to signature authority) over, a financial account (such as a bank or investment account) that is maintained with a financial institution located in a foreign country if, for any calendar year, the aggregate value of all foreign accounts exceeded $10,000 at any time during the year. This reporting requirement is met by filing Form TD F 90-22.1 (Report of foreign Bank and Financial Accounts, commonly known as an “FBAR”). FBARs are filed with a Department of the Treasury facility located in Detroit and are not to be filed with tax returns; the filing date for FBARs is June 30th. The requirement to file FBARs is in the regulations under 31 U.S.C. § 5314 (which is a provision of the Bank Secrecy Act). Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account. Criminal penalties may also apply. Refer to IRM 22.214.171.124 for additional FBAR penalty considerations.
Hedge-Funds and Private Equity Funds have suddenly become aware they are subject to the FBAR rules.
Please see: IRS Steps Up Scrutiny of Offshore Funds
Current Legal Authority From the IRS:
“43. Re: FAQ 9 A taxpayer recently learned that they have an FBAR filing
obligation but they do not have sufficient time to gather the
information necessary to properly file the FBAR by the June 30, 2009
due date. How should the taxpayer proceed?
Taxpayers who reported and paid tax on all their 2008 taxable income but only
recently learned of their FBAR filing obligation and have insufficient time to
gather the necessary information to complete the FBAR, should file the
delinquent FBAR report according to the instructions and attach a statement
explaining why the report is filed late. Send a copy of the delinquent FBAR,
together with a copy of the 2008 tax return, by September 23, 2009, to the
Philadelphia Offshore Identification Unit at the address in FAQ 9.
In this situation, the IRS will not impose a penalty for the failure to file the FBAR.
Additionally, if all 2008 taxable income with respect to a foreign financial account
is timely reported and a United States person only recently learned they have a
2008 FBAR obligation and there is insufficient time to gather the necessary
information to complete the FBAR, the United States person may follow the
procedures set forth above and no penalty will be imposed.
For 2008 tax returns due after September 23, 2009, the tax return does not need
to accompany the 2008 FBAR.
9. I have properly reported all my taxable income but I only recently
learned that I should have been filing FBARs in prior years to report my
personal foreign bank account or to report the fact that I have signature
authority over bank accounts owned by my employer. May I come
forward under the voluntary disclosure practice to correct this?
The purpose for the voluntary disclosure practice is to provide a way for
taxpayers who did not report taxable income in the past to voluntarily come
forward and resolve their tax matters. Thus, If you reported and paid tax on all
taxable income but did not file FBARs, do not use the voluntary disclosure
For taxpayers who reported and paid tax on all their taxable income for prior
years but did not file FBARs, you should file the delinquent FBAR reports
according to the instructions and attach a statement explaining why the reports
are filed late. Send copies of the delinquent FBARs, together with copies of tax
returns for all relevant years, by September 23, 2009, to the Philadelphia
Offshore Identification Unit at:
Internal Revenue Service
11501 Roosevelt Blvd.
South Bldg., Room 2002
Philadelphia, PA 19154
Attn: Charlie Judge, Offshore Unit, DP S-611
The IRS will not impose a penalty for the failure to file the FBARs.
Prior FAQs for FBAR that is, in part, supersede by the above:
18. What happens if an account holder is required to file an FBAR and fails to do so?
Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties, or both. If you learn you were required to file FBARs for earlier years, you should file the delinquent FBAR reports and attach a statement explaining why the reports are filed late. No penalty will be asserted if the IRS determines that the late filings were due to reasonable cause. Keep copies, for your record, of what you send.”
Ron Cohen, CPA, MS (Tax)
GREENSTEIN, ROGOFF, OLSEN & CO., LLP
39159 Paseo Padre Parkway, Suite 315
Fremont, CA 94538
Tel: 510.797.8661 x237