Thursday, February 14, 2013

Foreign Bank Account Regulations Part II

In my earlier post here, we talked about Foreign Bank Account Regulations and the importance of staying in compliance. The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010. Not only does FATCA require US Taxpayers to report financial assets in foreign countries, it also requires Financial Institutions to report directly to the IRS certain information about financial accounts held by US Taxpayers or foreign entities in which US Taxpayers have substantial interest. 

Let's first look at what most of us may encounter, the TD F 90-22.1, the Report of Foreign Bank and Financial accounts also known as FBAR.  

Who must file? :  

  • If you are a US Taxpayer, that is if you are a citizen or a resident alien and 
  • You had an interest in or signature authority over foreign financial accounts which had
  • An aggregate value exceeding $10,000 at any time during the calender year, 
you must file Form TD F 90-22.1. The Form is due on or before the 30th of June of the year immediately following the calender year you are reporting for. 

What is a Financial Account? :
  • It includes but is not limited to-securities, demand, checking, deposit, time deposit or other account maintained by a financial institution.
  • It also includes commodity futures or options account;
  • An Insurance Policy with Cash Value or Annuity Policy with Cash Value;
  • Shares in a Mutual Fund or similar pooled fund. 
What is a Foreign Bank Account?:
  • A financial account located in a foreign bank located outside the United States.
  • Example 1: An account maintained with a US Bank Branch physically located OUTSIDE the US is a foreign bank account.
  • Example 2: An account maintained with a Foreign Bank Branch physically located within the US is NOT a Foreign Bank account. 

Clear, so far? Okay then, moving on...there are like always, exceptions to this. The intricate details of which will depend on the kind of financial account you have with the foreign bank, but the major one that I get asked about all the time are JOINT ACCOUNTS OWNED BY SPOUSES. 


The spouse of an individual who files an FBAR is not required to file IF AND ONLY IF THE FOLLOWING CONDITIONS ARE MET:
  1. All financial accounts are jointly owned;
  2. ONE of the spouses is reporting them on a timely filed FBAR;
  3. BOTH spouses sign the FBAR on Item 44;


If the spouses have individual accounts to which the paradigms listed in the beginning apply, each of them has to file a SEPARATE FBAR. 

Closing a foreign bank account you have with the above limits will not absolve you from your filing requirement. 

Note that no extension in time to file the FBAR is available. Do not file this form with your federal tax return. File by mailing the form to:

Department of Treasury
PO Box 32621
Detroit, MI 48232

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Consult with a tax professional for your unique needs and make sure your questions are answered. Always remember to read my disclaimer here. If you have any more questions regarding this or other tax matters, contact me at manasa@mntaxsolutionsllc.com.