Do Your Clients’ International Assets Create Criminal Tax Exposure?

The U.S. government is cracking down on people who have foreign financial accounts (FFAs). Your clients with offshore exposure could be subject to both civil and criminal penalties if they don’t follow some basic rules.

The Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department, recently revised Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The final FBAR regulations came into effect on March 28, 2011, and apply to all FBARs that must be filed for FFAs maintained during the 2010 calendar year, as well as reports for all subsequent calendar years.

Who Is Required to File an FBAR?

An FBAR must be filed if you meet the following characteristics:

1. You qualify as a “United States person” – this includes U.S. citizens, residents, business entities, trusts, and estates;
2. You have a financial interest in or signature authority over one or more FFAs; and
3. The aggregate value of all FFAs exceeds $10,000 during any period of the calendar year reported.

Who Is Excepted from the Reporting Requirement?

Exceptions to the reporting requirement include the following types of accounts and U.S. persons:

1. Certain accounts jointly owned by spouses;
2. Persons who file a consolidated FBAR;
3. Correspondent/nostro accounts;
4. Government entities;
5. International financial institutions;
6. IRA owners and beneficiaries;
7. Participants in and beneficiaries of tax-qualified retirement plans;
8. Under certain circumstances, individuals who have signature authority over, but no financial interest in, an FFA;
9. Trust beneficiaries; and
10. Accounts at a United States military banking facility.

FBAR Information and Penalties