If you have a foreign bank account, if you can sign on your parents foreign account, or if you just forgot and left your IRA account in Canada, this is something you should pay attention to.
Congress recently linked the required to list foreign accounts to the U.S. Patriot Act, making the failure to to report offshore accounts a civil and criminal offense. If you are an American citizen living abroad or have family living abroad, remind them of this rule.
This filing requirement is only applicable if your account has an AVERAGE balance of $10,000 at any time during the year. It doesn't matter if you have not earned any interest. It doesn't matter what the account balance was on December 31st.
If this is applicable, you will need to file a form. It is called FBAR TD F 90-22.1 - Report of Foreign Bank and Financial Accounts. It is NOT filed with your tax return. The filing deadline is June 30 of each calendar year for accounts maintained in the previous year.
For example if you had accounts overseas in 2009, you must file by June 30, 2010. A post marked envelope on 6/30 does not apply here. Your return MUST be received by
6/30. No extensions are granted.
Here are some technical definitions:
Each "United States person" having a financial interest in, or signature over, a bank, securities or other financial account in a foreign country shall report to the IRS for each year such relationship exits. A "person" includes individuals and all forms of business entities, trusts and estates. This includes children or any other person whose names are listed as signers on any foreign account even though they do not have a current interest in such account.
A Brief Legislative History: Registered Domestic PartnersPleasant Hill, CA CPA / Arlene K. Mose, CPA
A financial
account includes a bank account (such as saving, demand, checking
deposit and time deposit), brokerage account, mutual fund, unit trust or other
types of financial accounts. An account set up to secure a credit card as well
as a life insurance policy having a cash surrender value are financial
accounts.Individual bonds, notes or
stock certificates are not financial accounts.
Foreign
Country includes all
geographical areas outside the
US,
the
Commonwealth of
Puerto Rico, the Commonwealth of the Northern Mariana
Islands and the territories and possession of the
US
including
American Samoa, Guam and the
Virgin Islands
Location
of an account, not
the nationality of the financial institution where the acct is held determines
whether it is located in a foreign country. So for ex, a branch of a
US financial
institution located in a foreign country is a foreign account.US Military banking facility abroad is not
considered a foreign account.
Financial
Interest includes
accounts that the
US
person is owner of record or has legal title. It also includes accounts where the owner of record is a person
acting as an agent, nominee or in some other capacity on behalf of a
US person. It includes a corporation in which a
US person directly/indirectly owns
50% or more of the stock.Same goes for
a partnership or trust. In these cases, both the entity and the
US person have
to file the FBAR.
Signature
Authority if a
person can control the disposition of money or other property in an account by delivery
of a document with his/her signature. If two or more people have a partial
interest, each must file a FBAR.
Your Individual Income Tax Return - Don't forget to mark Schedule B on your Form 1040 with a YES - foreign owned accounts.
There are tons of penalties - The minimum penalty is $500 for a civil penalty for negligent violation. If you have a pattern of negligent violations, the penalty can be $50,000.
There are also civil penalties for willful violations for failure
to file or filing a false FBAR.All penalties can be aggregated.The criminal penalties can be as steep as $250,000 or five years in
prison or both.
Tip #1 - if traveling overseas - just pay with beads and avoid this problem.
