March 2, 2010
IRS announces limited FBAR reporting relief
A new notice provides administrative relief to certain persons who may be required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for calendar year 2009 and earlier calendar years.
Background. Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing TD F 90-22.1, with the Department of the Treasury on or before June 30, of the succeeding year.
On Aug. 31, 2009 (see Federal Taxes Weekly Alert 08/13/2009), IRS published Notice 2009-62, 2009-35 IRB 260, which extended the filing deadline for (i) persons with no financial interest in a foreign financial account but with signature or other authority over that account (“signature authority”); and (ii) persons with a financial interest in, or signature authority over, a foreign financial account in which the assets are held in a commingled fund (“foreign commingled funds”). This extension was provided in order for the Treasury Department to have the time necessary to develop comprehensive FBAR guidance.
Since the issuance of Notice 2009-62, the Treasury Department has published proposed FBAR regs, as well as proposed revisions that clarify instructions for the FBAR (see next article below).
New relief. To provide taxpayers with guidance on who is required to file FBARs due on June 30, 2010, and in particular to provide immediate guidance to taxpayers on how to answer FBAR-related 2009 federal income tax return questions (e.g., Schedule B of Form 1040, the “Other Information” section of Form 1041, Schedule B of Form 1065, and Schedule N of Form 1120), IRS is providing the following administrative relief:
· Signature authority. Persons with signature authority over, but no financial interest in, a foreign financial account for which a FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. This new deadline applies to FBARs reporting foreign financial accounts over which the person has signature authority, but no financial interest, for the 2010 and prior calendar years.
· Certain foreign commingled funds. Persons with a financial interest in, or signature authority over, a foreign commingled fund that is a mutual fund are required to file a FBAR unless another filing exception, as provided in the FBAR instructions or other relevant guidance, applies. IRS won't interpret the term “commingled fund” as applying to funds other than mutual funds with respect to FBARs for calendar year 2009 and prior years. Thus, IRS won't apply its enforcement authority adversely to persons with a financial interest in, or signature authority over, any other foreign commingled fund with respect to that account for calendar year 2009 and earlier calendar years. A financial interest in, or signature authority over, a foreign hedge fund or private equity fund is included in this relief.
· FBAR-related questions on federal tax forms. Provided the taxpayer has no other reportable foreign financial accounts for the year in question, a taxpayer who qualifies for the filing relief provided in Notice 2010-23 should check the “no” box in response to FBAR-related questions found on federal tax forms for 2009 and earlier years that ask about the existence of a financial interest in, or signature authority over, a foreign financial account.