Offshore Accounts [2009-09-24]
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The IRS is now taking a much stronger position regarding US
tax residents with foreign bank accounts.
Treasury Department form TD F-90-22.1, the Report of Foreign Bank and
Financial Accounts (“FBAR”), is due June 30, 2009. While it is certainly legal to have an
account outside the U.S. and there are many everyday situations where it makes
sense, the critical point is to disclose the account on your U.S. income tax
return and, in some cases, on the FBAR.
Willful failure to file this form can result in penalties. Any United States person who has a financial
interest in, signature authority over, or “other authority over” financial
accounts in a foreign country if the aggregate value of these accounts exceeds
$10,000 at any time during the calendar year is required to file a FBAR. This includes a variety of financial accounts
and instruments, and applies whether the account is maintained for one’s own
benefit, or for the benefit of others including non-U.S. persons. The FBAR must also be filed where the owner
of record is a corporation, partnership, or trust and a U.S. person owns
directly or indirectly more than 50% of total value of the stock, profits, or
beneficial interest, respectively. The
IRS has stated that if all taxable income was reported and taxes, but FBARs
were not filed, taxpayers should file the delinquent FBARs with copies of
relevant tax returns and an explanatory statement.