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Presented by Glen MacMillan Adams & Miles LLP Formerly known as Form TD F 90-22.1 . Now known as FinCEN Form 114 . Required to be filed if the aggregate value of all foreign financial accounts which a U


  1. Presented by Glen MacMillan – Adams & Miles LLP

  2.  Formerly known as “Form TD F 90-22.1 ” .  Now known as “FinCEN Form 114 ” .  Required to be filed if the aggregate value of all foreign “financial accounts” which a “U .S. person” has a “financial interest” in or “signature authority” over exceeds $10,000 at any time during a calendar year.  $10,000 threshold was set in 1970 and has never been increased.

  3.  A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution).  A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).

  4.  A foreign financial account is a financial account located outside the U.S.  An account maintained with a branch of a U.S. bank that is physically located outside the United States is a foreign financial account.  An account maintained with a branch of a foreign bank that is physically located in the U.S. is not a foreign financial account.  Intent seems to be to identify accounts that are not subject to existing U.S. reporting rules.

  5.  U.S. citizens and U.S. residents of any age.  Non-residents who meet the substantial presence test but claim non-resident status under a tax treaty.  However, non-residents who timely file form 8840 to claim closer connection to another country are not subject to FBAR reporting.  Entities, including but not limited to, corporations, partnerships, limited liability companies trusts or estates created or organized in the United States or under the laws of the United States.  A child is responsible for filing his or her own FBAR. If a child cannot file for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child.

  6.  An entity disregarded for tax purposes is not relieved from an obligation to file an FBAR.  For example, a disregarded LLC is still required to file the FBAR.

  7.  A U.S. person has a financial interest in a foreign financial account for which: ◦ The U.S. person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the U.S. person or for the benefit of another person, ◦ The owner of the account is a corporation in which the U.S. person owns directly or indirectly (i) more than 50% of the total value of shares of stock or (ii) more than 50% of the voting power of all shares of stock, or ◦ The owner of the account is a partnership, trust or any other entity where the U.S. person has more than a 50% interest.

  8.  Signature authority is the authority of an individual (alone or with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account.  For example, a son with signing authority over (but no financial interest in) his elderly parents’ foreign bank account.

  9.  A spouse is not required to file a separate FBAR if ◦ all financial accounts of the non-filing spouse are jointly owned with the filing spouse, ◦ the filing spouse reports the jointly owned accounts on a timely filed FBAR, and ◦ Form 114a is signed by non-filing spouse and retained in filing spouse’s records.  In all other cases, both spouses must file separate FBARs and both must report the entire value of jointly owned accounts.

  10.  FBARs must be efiled.  Filers can efile their own FBARs on FinCEN’s website at http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html  The online efiling process is relatively straightforward.  Assistance available by calling E-Filing Help Desk 1-866- 346-9478 (option 1) or via email BSAEFilingHelp@fincen.gov  Detailed FBAR instructions can be found at http://www.fincen.gov/forms/files/FBAR%20Line%20Item%20 Filing%20Instructions.pdf  Third party preparers efiling FBARs on behalf of clients must obtain client consent with form 114a “Record of Authorization to Electronically File FBARs ” .

  11.  Must be efiled on or before June 30 th of the year immediately following the calendar year being reported.  No extension of time available for filing an FBAR.  Extensions of time to file federal tax returns do not extend the June 30 th FBAR due date.

  12.  New law provides that the FBAR due date “shall be April 15 with a maximum extension for a 6- month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081 – 5 …… . ”  It appears U.S. citizens living outside the U.S. should have an automatic extension to June 15 to file both the 1040 and FBAR.

  13.  Filers can request an extension to file the FBAR to October 15 th by filing an extension that is expected to be similar to Form 4868.  For first time FBAR filers, the new law allows the IRS to waive penalties for failure to timely file an extension request.  Not clear whether any changes are forthcoming for FBAR filers that are not individuals.

  14.  The following are not required to file an FBAR ◦ An entity named in a consolidated FBAR filed by a greater than 50 percent owner. ◦ Governmental entities. ◦ Owner or beneficiary of an IRA. ◦ Beneficiary of a retirement plan is not required to report a foreign financial account held by or on behalf of the retirement plan.

  15.  Part I - Filer Information ◦ Relatively straightforward information about the filer ◦ Name, address, SSN/EIN, date of birth (if applicable), etc. ◦ See separate FBAR instructions for Box 14a and 14b if filer has a financial interest in or signature authority over 25 or more foreign financial accounts.

  16.  Part II - Information on financial account(s) owned separately ◦ Disclose type of account, account number, name and address of financial institution where account is located, maximum value in the account during the year. ◦ Maximum values must be reported in US$. ◦ Convert foreign currency amounts to US$ using the year- end exchange rate even if the maximum value has been determined at some other date. ◦ A movement of funds between foreign accounts results in those funds being included in the maximum value determination for each account.

  17.  Part III - Information on financial account(s) owned jointly ◦ Same account information as required for separately owned accounts. ◦ Maximum value reported for joint accounts is the maximum gross value in the account; the value is not reduced to reflect the joint owner’s prorate share of the account. ◦ Additional information includes reporting the number of joint owners and identification of the “principal joint owner ” . ◦ A spouse is always the principal joint owner of a jointly owned account. ◦ For joint accounts with non-spouses, the term “principal joint owner” is undefined.

  18.  Part IV - Information on Financial Account(s) where filer has signature or other authority but no financial interest in the account(s) ◦ Example: a U.S. person with signing authority over a parent’s foreign account.

  19. –  Part IV Signature authority over employer accounts ◦ Example: A U.S. person has signing authority over bank account of an arm’s length employer. ◦ A U.S. person who (1) lives outside the U.S. (2) is an employee of an employer located outside the U.S. and (3) has signature authority over a foreign financial account of the employer only needs to report basic identifying information about the employer one time. ◦ Detailed information about the value and location of the account(s) is not required.

  20.  Additional Part IV exceptions from reporting ◦ Employees of banks subject to U.S. examiners. ◦ Employees of financial institutions and certain other Entities subject to SEC examinations. ◦ Employees of certain entities controlled by U.S. publicly traded entities. ◦ Various other miscellaneous employee exceptions.

  21.  Part V - Information on financial account(s) where filer is filing a consolidated report ◦ A U.S. entity that owns directly or indirectly a greater than 50 percent interest in another entity that is required to file an FBAR is permitted to file a consolidated FBAR on behalf of itself and the other entity.

  22.  A person who is required to file an FBAR and fails to properly file is subject to a $10,000 penalty.  If there is reasonable cause for the failure and the balance in the account is properly reported, no penalty will be imposed.  A person who willfully fails to report an account or disclose required information may be subject to a penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation.  Willful violations may be subject to criminal penalties.

  23. Questions?

  24. Presented by Glen MacMillan – Adams & Miles LLP

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