FBAR Practice Unit<\/a> provides a useful summary of the FBAR reporting rules. More importantly, it provides important insights into how the IRS (and its agents) interpret these rules.\u00a0 To help taxpayers and tax advisors, this article provides a summary of the FBAR Practice Unit.<\/p>\n\n\n\nGeneral:<\/p>\n\n\n\n
The Bank Secrecy Act (\u201cBSA\u201d) requires United States persons\n(\u201cUSPs\u201d) to file FinCEN Forms 114, Report of Foreign Bank and Financial\nAccounts (\u201cFBARs\u201d), for each calendar year in which the aggregate amount(s) in\ncertain foreign account(s) exceed $10,000. \nAlthough the purpose of the FBAR reporting requirements is to help the\ngovernment identify and trace funds used for illegal purposes or help identify\nunreported income maintained or generated overseas, even lawful USPs often run\nafoul of the technical and complex FBAR reporting requirements.<\/p>\n\n\n\n
FBAR Filing Deadline:<\/p>\n\n\n\n
How Long Does the IRS Have to Impose Civil Penalty\nAssessments for Late-Filed FBARs? Under the BSA, the IRS can assess civil\npenalties if a USP has an FBAR reporting obligation and fails to timely file a\ncomplete and accurate FBAR. Unlike other\nfederal income tax penalties, the IRS is limited to making an assessment of\nFBAR penalties up to six (6) years from the date of the FBAR reporting\ndeadline.<\/p>\n\n\n\n
Example: For his 2019\ncalendar year, USP has an FBAR reporting obligation. USP fails to file an FBAR by October 15,\n2020. The IRS has until October 15,\n2026, to assess an FBAR civil penalty against USP. This same six-year assessment period applies\nwhether USP files an FBAR or not.<\/p>\n\n\n\n
What is a Financial Account? <\/p>\n\n\n\n
Financial accounts include bank accounts and securities\naccounts. In addition, financial account\nis interpreted more broadly to include: \n(1) commodity futures or options accounts; (2) insurance or annuity\npolicies with a cash value; and (3) mutual funds or similarly-pooled funds. <\/p>\n\n\n\n
Financial accounts do not include: (1) stocks and bonds held directly by a USP;\n(2) real estate or certain accounts holding solely real estate (e.g., a Mexican\nfideicomiso); (3) precious metals\/stones or other jewels held directly by a\nUSP; and (4) in most instances, a safety deposit box.<\/p>\n\n\n\n
What is a Financial Interest, Signature or Other Authority?<\/p>\n\n\n\n
USPs can have either direct or indirect financial interests\nthat are reportable on FBARs. For\nexample, if a USP is an owner of record or has legal title of the foreign\naccount, the USP has a direct and reportable interest, provided the other FBAR\nreporting requirements are met. In\naddition to a direct interest, a USP can have a reportable indirect interest in\nthe foreign account at issue.<\/p>\n\n\n\n
USPs who have signature or \u201cother authority\u201d over foreign\naccounts also may have reportable foreign accounts. Generally, the IRS deems a USP to have\nsignature or other authority if that USP (either alone or in conjunction with\nanother) can control the disposition of money, funds, or other assets held in a\nfinancial account by direction communication to the person with whom the\nfinancial account is maintained.<\/p>\n\n\n\n
Example: Corporation\nA is the owner of a foreign account in Switzerland. USP owns 75% of Corporation A (both vote and\nvalue). USP has a reportable indirect\ninterest in the foreign account, provided the other FBAR reporting requirements\nare met. Similar rules apply to\npartnerships and trusts.<\/p>\n\n\n\n
What\u2019s missing:<\/p>\n\n\n\n
Although the Practice Unit provides an excellent overview of\nthe relevant statutes and regulations, it fails to provide methods to correct\nnoncompliance. For some options, see our\nfirm\u2019s prior articles on the IRS DFSP or Streamline Filing Compliance\nProcedures.<\/p>\n","protected":false},"excerpt":{"rendered":"
The IRS LB&I recently issued its Practice Unit on FBARs. Practice Units are \u201cjob aids\u201d and training materials intended to describe for IRS agents helpful practices about tax concepts in general and specific types of tax reporting forms. The FBAR Practice Unit provides a useful summary of the FBAR reporting rules. More importantly, it provides […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"1","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4398","post","type-post","status-publish","format-standard","hentry","category-planning-for-tax-minimization"],"_links":{"self":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4398","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/comments?post=4398"}],"version-history":[{"count":1,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4398\/revisions"}],"predecessor-version":[{"id":4402,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4398\/revisions\/4402"}],"wp:attachment":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/media?parent=4398"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/categories?post=4398"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/tags?post=4398"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}