Failure to file an FBAR (Report of Foreign Bank and Financial Accounts) can result in penalties of up to $500,000 and 10 years imprisonment, so it’s essential for you and your clients with foreign financial accounts (FFAs) to get a handle on the Treasury’s escalating FBAR rules.
But deciphering the FBAR rules hasn’t always been a straightforward proposition. Until recently, the FBAR requirements were shrouded in mystery; but with the release of final regulations this year, the rules are starting to make sense. Further important clarifications also were made by the IRS at a June 1 webcast.
An FBAR must be filed by anyone (1) who is a “United States person”—a U.S. citizen, resident, business entity, trust, or estate; (2) with a financial interest in, or signature authority over, one or more FFAs; or (3) with an aggregate value exceeding $10,000 during any period of the calendar year reported.
On Feb. 24, 2011, the Financial Crimes Enforcement Network (FinCEN), a bureau within the Treasury Department, published final regulations amending the FBAR regulations. 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 and all subsequent calendar years. FinCEN issued a revised Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), shortly thereafter.
Although the final regulations were welcomed by many financial professionals for the increased certainty they offered, a lot of questions were left unanswered.
Some of those questions were answered at the IRS-sponsored webcast presented by Rod Lundquist, IRS Senior Program Analyst, Bank Secrecy Act. At the end of his presentation, Lundquist read participants’ questions. Answers were provided by Samuel Berman, an attorney with the IRS’ Small Business/Self-Employed Division.
Accounts at Foreign Branches of a U.S. Bank