Anyone in this situation should seek qualified tax advice from a US taxation attorney and discuss the risks and tax issues associated with the various options to remedy their situation. In certain cases, delinquent so-called Foreign Bank Account Reports (FBARs) can be filed without imposition of any penalty. The individual with unfiled FBARs or other tax related information returns should learn about the various options including, the IRS Voluntary Disclosure programs and working under attorney-client privilege (which is not available with an accountant) arrive at the best solution given their particular facts.

We are available to help with any such issues. Assisting clients on such matters comprises a significant part of our practice.

Meanwhile below are some fast facts re FBARs -

•US persons who have ownership or control (for example signature authority) of foreign accounts with an aggregate value of over $10,000 in the calendar year are required to file a so-called "FBAR" (Foreign Bank Account Report):

Accounts required to be disclosed:

•Bank, securities, financial instruments accounts
•Accounts held in commingled funds (mutual funds) and the account holder holds an equity interest in the fund
•Individually owned bonds, notes, stock certificates, and unsecured loans are not "accounts"
•Foreign life insurance or annuities with cash surrender value are "accounts"

Many mistakes are made with FBAR filings, the most common being:

•Many persons are under the mistaken belief that if one has several overseas accounts and a particular account is not over $10,000 then that account does not have to be reported. This is incorrect. Remember if the highest aggregate value of all of the foreign accounts on any day in the tax year is over $10,000, then all accounts must be reported on the FBAR
•Another common mistake arises when an account beneficially belongs to another person. In this case it is often erroneously believed that the nominee does not need to report that account on an FBAR. This is incorrect; the nominee must still file the FBAR if the dollar threshold is met by the nominee

•Other mistakes involve an improper understanding about what must be disclosed on the FBAR – for example foreign mutual funds or foreign life insurance / foreign annuity with a cash surrender value

Note: US taxpayers filing Form 1040 are required to check a box on Schedule B, Part III, indicating whether they have an interest in or signature authority over a financial account in a foreign country. Make sure this question and its follow-up are answered both accurately and completely.

The FBAR form must be filed by 30 June following the calendar year for which the interest in a foreign account is reported. The FBAR form may not be extended; therefore, 30 June is always the deadline regardless of whether the taxpayer's income tax return is extended. The form is not submitted to the IRS, but instead must be mailed to a special address at Department of the Treasury.

The FBAR form is not to be attached to any tax return.

Delinquent Tax Returns and FBARs

Overseas Americans who have dropped out of the tax filing system are now in a very perilous situation. Most of them will have foreign (non-US) bank and/or financial accounts for which FBARs should have been filed. Of course, Americans living in the US may also have non-US accounts for which FBARs are required. The IRS is now being ruthless in assessing penalties for failure to file FBARs or for incorrect FBAR filings.



Virginia La Torre Jeker, J.D. vjeker@eim.ae