Stiff Penalties For Not Meeting Foreign Asset Filing Requirements – Deadline Approaching!
J. Jerad Suess, CPA
Have you ever lived abroad? Do you have relatives that live abroad? Maybe your son or daughter is studying abroad? If you have a financial interest in, signature authority, or other authority over one or more foreign bank, savings, or investment accounts, and the aggregate balance is over $10,000 at any time during the year, you have additional reporting requirements to the IRS. You may have to report your foreign accounts to the government, even if the accounts do not generate any taxable income. Taxpayers who are required to report must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
This is not a form that you file with your income tax return. Rather it is a separate form filed with the Treasury Department in Detroit. The report must be received by the Treasury Department, not postmarked, by the June 30 due date. Penalties for failing to meet the FBAR requirements are severe and can include jail time. The maximum civil penalty for a willful violation of the FBAR reporting and recordkeeping requirements is the greater of $100,000 or 50% of the balance in the account at the time of the violation.
Additionally, there is an IRS form that is required once your aggregate holdings of specified foreign assets, including foreign stock or securities, foreign partnership interests, foreign hedge funds and private equity funds, reaches $50,000. For taxable years after March 18, 2010, taxpayers with an interest in specified foreign financial assets have to file Form 8938, Statement of Specified Foreign Financial Assets, by the due date of your tax return, including extensions. For most individual taxpayers, this means you will start filing Form 8938 with the 2011 income tax return.
If the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year for taxpayers filing single or married filing separate, or, for taxpayers filing married filing jointly, $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year, you will be required to file Form 8938. The penalty for not filing a complete and correct Form 8938 by the due date (including extensions), is $10,000.
Does either of these situations apply to you? Would you like to find out more on how and when to report, or discuss your situation with an accountant? Please be aware that each reporting situation is unique. If you would like to discuss potential reporting requirements, please feel free to contact us at (319) 364-2945.
By J. Jerad Suess, CPA