There is a major and often overlooked tax filing that is due on June 30th. Any US person that has a financial interest in or signature authority over foreign financial accounts with an aggregate value in excess of $10,000 at any time during 2010 is required to file. Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (“FBAR”) must be received by the Department of Treasury on or before June 30th. The June 30th filing date may not be extended. There are heavy penalties for failing to file this return.
The IRS and Department of Treasury have used this filing as a means to discover and penalize “tax cheats”. Consequently the penalty for failing to file this form is excessive (bordering on abusive). The penalty is 50% of the maximum amount in the foreign accounts (plus interest and potential income tax liability). If the failure to file is determined to be criminal, there could also be a maximum 5 year prison sentence.
The IRS has periodically provided “amnesty” programs to allow delinquent filers to come forward. We have a new “amnesty” program available through August 31, 2011. Under this program the maximum penalty is up to 25% of the highest aggregate balance. Please see prior blog postings for more details on this program.
This area of law and reporting is extremely complicated. Please contact us for assistance in navigating this complicated area of law.