IRS announces temporary relief from FBAR filing deadlines

The IRS has announced temporary extensions and suspensions of the requirement to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The temporary relief applies to persons who are not U.S. citizens, residents or entities and persons with signature authority over, but no financial interest in, a foreign financial account.

FBAR

U.S. citizens, residents and domestic entities generally must file an FBAR if they have financial interests in, or signature or other authority, over a bank, securities, or other financial account in a foreign country. A "financial account," the IRS has explained, includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution or other person engaged in the business of a financial institution. A person has signature authority over an account if the person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained.

The threshold amount that triggers the FBAR requirement is $10,000. The FBAR is due by June 30th of the year following the year that the account holder meets the $10,000 threshold. A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income for U.S. tax purposes.

FBARs are not filed with the IRS. Instead, the completed forms are sent to the U.S. Treasury. Failure to file an FBAR when required to do so may potentially result in civil penalties, criminal penalties, or both.

Non-U.S. citizens, residents or entities

The IRS has suspended the FBAR filing requirement due on June 30, 2010 for persons who are not U.S. citizens, U.S. residents or domestic entities. Additionally, the IRS reported that all persons may rely on the definition of U.S. person in the July 2000 version of the FBAR instructions to determine if they have an FBAR filing obligation for the 2009 and earlier calendar years. The July 2000 FBAR Instructions define a U.S. person as a citizen or resident of the U.S., a domestic partnership, a domestic corporation or a domestic estate or trust.

Signature authority

The IRS also provided that persons with signature authority over, but no financial interest in, a foreign account for which an FBAR would otherwise have been due on June 30, 2010 will now have until June 30, 2011 to report those financial accounts. The June 30, 2011 deadline applies to FBARs reporting foreign financial accounts over which the person has signature authority, but no financial interest in, for the 2010 and prior calendar years.

Example. Alice, a U.S. citizen, gives her nephew Jason, who is also a U.S. citizen, power of attorney to her bank account in Ireland. Jason has signature authority over Alice's bank account in Ireland. If Jason is required to file an FBAR that would have been due on June 30, 2010, Jason now has until June 30, 2011 to report the bank account.

Announcement 2010-16, Notice 2010-23