The American Institute of Certified Public Accountants (AICPA) Report of Foreign Bank and Financial Accounts (FBAR) Task Force recently met with Internal Revenue Service (IRS) FBAR officials and learned of developments with the new form, reporting rules, and the due diligence requirements.

Reporting Requirements

When gathering information for your tax return, whether you’re an individual or business, it’s extremely important to report the existence of foreign bank accounts and disclose the information. Even if you have no reportable interest or dividends, you still have to report foreign bank account information.

Taxpayers who are currently filing Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations), Form 8865 (Return of U.S. Persons with Respect to Certain Foreign Partnerships), or Form 3520 (Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts) may also be subject to the FBAR reporting requirements.

Any taxpayer with the responsibility to file "Report of Foreign Bank and Financial Accounts" must file form TD F 90-22.1 on or before June 30, 2009. Please note that the return must be received by June 30, not mailed by that date.

Expanded Scope of FBAR

Beginning for the 2008 tax year, the new FBAR requirements apply to persons in and doing business in the U.S. Therefore, a non-resident alien working in the U.S. may be subject to the new 2009 FBAR filing. A foreign corporation that is doing business in the United States is also considered a U.S. person.

The IRS website indicates that persons who are merely visiting or who sporadically conduct business in the United States are not in and doing business in the United States for FBAR reporting purposes. The IRS website provides examples of persons who are not considered to be in and doing business in the United States for FBAR reporting purposes and do NOT need to file FBARs.

Penalty Enforcement for the FBAR

The IRS has announced that it intends to enforce penalties for FBAR noncompliance – as far back as six years, the statute of limitations under the Bank Secrecy Act, Title 31 USC. The civil penalty for non-willful violations can be as much as $10,000. The civil penalty for willfully failing to file can be as high as the greater of $100,000 or 50% of the total balance of the foreign account. Also, failure to file an FBAR and the filing of a false FBAR are both violations that are subject to criminal penalties.

Under a limited voluntary disclosure program in effect until September 23, 2009, all prior year reporting obligations, from 2003 forward, may be filed with the IRS, so long as the income from such accounts has been properly included on the tax payers’ income tax returns for those years. Please note that civil penalties still may apply under the voluntary disclosure program.

For more information, please speak with your tax advisor from one of our four offices listed below, or contact Greg Dickey, International Tax Partner, at 303.298.9600 or gdickey@heincpa.com.

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