If you had a financial interest in a foreign financial account, or signatory or authority over one or more accounts whose aggregate value exceeded $10,000 USD at any point in 2015, you are required to file an IRS FBAR (Report of Foreign Bank and Financial Accounts). You must submit the FBAR electronic filing due June 30 as the IRS will not allow any extensions.
This applies to any offshore bank or investment account, or assets including, but not limited to real property, foreign trust, ownership in a foreign corporation or any tangible asset or income not located within the United States. The IRS seeks strict compliance with FBAR reporting requirements for all US taxpayers, and audits of offshore assets and income for US taxpayers have already begun. This requirement extends to all those the IRS identifies as a “U.S. Person” including US citizens, US residents (including resident aliens), legal entity such as corporations, partnerships or LLCs created in the US, as well as trusts or estates formed under US law (even if they may be disregarded for federal income tax purposes).
FBAR reporting requirements extend to “foreign” accounts which means any financial account outside of the 50 states and the District of Columbia, including territories and possessions of the US. Many have asked about foreign accounts in “US Banks.” The IRS maintains that an offshore account with a US bank is a foreign account subject to FBAR reporting, while an account at a foreign bank located in the US is most often not a foreign account under FBAR rules. “Accounts” can take many forms including traditional savings, checking or investment accounts, as well as demand deposit, securities, security derivatives, debit card, prepaid credit card and any other financial instrument account, including certain insurance or annuity policies and pension funds. Even online gambling accounts held in offshore banks qualify as a “foreign” account.
You have a signatory interest or FBAR related authority if you as an individual, or in conjunction with another party can control the disposition of money, investments, property or assets held in a foreign account. You have a qualifying financial interest in any foreign financial account if you are the owner of record, even if the account benefits another person or charity (for example) entirely. You also have a financial interest in foreign accounts owned by entities in which you have a controlling interest – generally more than 50%. However, you may have FBAR reporting requirements even if you hold as little as 10% of a foreign asset or investment.
The FBAR electronic filing due June 30 cannot be ignored or understated. The failure to make a transparent and full disclosure of all assets, accounts and income exposes US taxpayers to substantial penalties, interest and even risk of jail time. We invite you to contact the experienced international tax and FBAR attorneys at Allen Barron for a free consultation at 866-631-3470. Learn about OVDP or streamlined options for disclosure of previously unreported assets, and how we can reduce your exposure to the IRS.