According to the IRS, you may be required to file an FBAR on June 30, 3012, if you own or have authority over a foreign financial account, including a bank account, a unit trust, mutual funds or other types of financial accounts. Even if you’re not a signer on the account, your status as an officer or manager for the entity that controls it could make you responsible for disclosure.
Mutual funds, the IRS states, include partnership interests in hedge funds, private equity funds and other investments that are organized under foreign laws. These entities may be owned directly or indirectly through a U.S. fund that has invested in a foreign fund.
Why is it necessary?
Anyone who is a citizen of or resident in the United States, or has a business there, is generally allowed to own a foreign account. But the FBAR is a tool to help the federal government identify those who may be using foreign financial accounts to circumvent various U.S. laws.
Investigators use FBARs to help identify, or trace, funds used for illicit purposes — or to identify unreported income kept or generated abroad. Here’s an overview of what the form requires.
Who must file — and when?
Specifically, you’re required to file the report if:
- You or your business has either a financial interest in or signature authority (or something comparable) over one or more accounts in a foreign country, and
- The aggregate value of those accounts exceeds $10,000 at any time during the calendar year.
The law applies to most areas outside the United States, Puerto Rico and U.S. territories and possessions, such as the U.S. Virgin Islands and Guam.
FBAR reports are normally due annually on June 30 and cover the previous calendar year. So, for example, a report for the period of Jan. 1, 2011, to Dec. 31, 2011, is due on June 30, 2012.
The IRS is responsible for investigating possible civil violations, assessing and collecting civil penalties and issuing administrative rulings. The Department of Justice is responsible for criminal violations.
Penalties vary by severity, but can climb to $100,000 for willful civil infractions ($10,000 for nonwillful infractions) and to $500,000 and 10 years in prison for criminal violations.
Where can I find out more?
Visit the IRS online, and contact a Houston CPA firm such as TR Moore & Company for help assessing your particular situation.
