Tax - Reporting of Foreign Accounts
Do you or does your company have signature or other authority over or a financial interest in any foreign financial account? Then you may be required to file with the U.S. Treasury a Report of Foreign Bank and Financial Account.
Every individual who is a U.S. citizen or resident and every U.S. corporation, partnership, limited liability company, trust and estate, is required each year to file no later than June 30 a Report of Foreign Bank and Financial Account on U.S. Treasury Department Form TD 90-22.1 if such person has a financial interest in or signature authority, or other authority over any financial account in a foreign country, and the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. An individual must also report such foreign accounts on his or individual income tax return by completing boxes 7a and 7b on Form 1040 Schedule B. No extensions of time are available for filing the Report of Foreign Bank and Financial Account and an extension of time to file your income tax return does not extend the time for filing this report or serve as a substitute for filing this report.
1. What is a foreign country?
A “foreign country” includes all geographical areas outside the United States, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, and the territories and possessions of the United States (including Guam, American Samoa, and the United States Virgin Islands).2. What is a financial account?
A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts. The term includes any savings, demand, checking, deposit, or any other account maintained with a financial institution. The account need not be interest bearing or denominated in U.S. currency.3. What constitutes signature or other authority over an account?
A person has signature authority over an account if such person can control the disposition of money or other property in it by delivery of a document containing his or her signature (or his or her signature and that of one or more other persons) to the bank or other person with whom the account is maintained. Other authority exists in a person who can exercise comparable power over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means. Thus you must file a report if you have authority over an account merely as an officer, as a fiduciary or under a power of attorney.An officer or employee of a bank which is subject to the Supervision of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, or the Federal Deposit Insurance Corporation need not report that he has signature or other authority over a foreign bank, securities or other financial account maintained by the bank, if the officer or employee has NO personal financial interest in the account.
An officer or employee of a domestic corporation whose equity securities are listed on a national securities exchange or which has assets exceeding $10 million and 500 or more shareholders of record, need not file a report concerning the other signature authority over a foreign financial account of the corporation, if he has NO personal financial interest in the account and he has been advised, in writing, by the chief financial officer of the corporation that the corporation has filed a current report, which includes that account.
You need not have a direct interest in the foreign account. Any U.S. corporation which owns a foreign subsidiary which has foreign accounts is required to file, as well as any owners of the U.S. holding company who own more than 50% of the value of its outstanding shares.
There are substantial civil and criminal penalties for failure to file. The civil penalty can be a fine of up to $10,000 per violation, and if the failure to file is willful, up to the greater of $100,000 or 50% of the account value of the unreported accounts. Criminal penalties, which can be imposed concurrently with civil penalties, can result in fines up to $500,000 and up to 10 years in prison.
The Form TD 90-22.1 can be downloaded from the IRS website at: http://www.irs.gov/pub/irs-pdf/f90221.pdf
Completed forms should be sent to:
U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
Please contact the Troutman Sanders LLP Tax Practice Group if you are in doubt as to whether you must file or have failed to file in prior years and are unsure what to do.