In general, a U.S. person must file Federal Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR) if that person has a financial interest in, signature authority or other authority over any financial account(s) in a foreign country and the aggregate value of these account(s) exceeds $10,000 at any time during the calendar year. The filing deadline for FBARs for each year is June 30 of the following year.
The U.S. Treasury Department and IRS released guidance, specifically Announcement 2010-16 and Notice 2010-23, which provides significant relief to persons currently required to file and those who may have been required to file the FBAR. Announcement 2010-16 and Notice 2010-23 were issued to provide taxpayers with guidance on who is required to file FBARs due June 30, 2010. As a result of the recent guidance issued by the IRS, taxpayers should evaluate whether they are entitled to take advantage of the administrative relief provided under Notice 2010-23 and whether they may rely on the exception for filing under Announcement 2010-16.
Announcement 2010-16
The requirement to file an FBAR due on June 30, 2010, is suspended for persons who are not United States citizens, United States residents, or domestic entities. Additionally, all persons may rely on the definition of "United States person" found in the July 2000 version of the FBAR instructions to determine if they have an FBAR filing obligation for the 2009 and earlier calendar years. The definition of "United States person" from the July 2000 version of the FBAR is as follows: (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust. This substitution of the definition of "United States person" applies only with respect to FBARs for the 2009 calendar year and, as originally provided in Announcement 2009-51, to earlier calendar years.
Notice 2010-23
Notice 2010-23 provides administrative relief regarding FBAR filings for certain persons who may be required to file an FBAR for calendar year 2009 and prior years. The administrative relief is as follows:
1. Signature Authority
Persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. The deadline of June 30, 2011, 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.
2. 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 an FBAR unless another filing exception, as provided in the FBAR instructions or other relevant guidance, applies. The IRS will not 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, the IRS has determined it will not apply its enforcement authority adversely in the case of 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 the administrative relief provided in the preceding sentence. The notice effectively provides a filing exception for interests in private equity funds and foreign hedge funds for calendar year 2009 and earlier calendar years. While Notice 2010-23 does not address the future treatment of commingled funds, it states generally that mutual funds are required to file an FBAR.
3. FBAR-Related Questions on Federal Tax Forms
The notice provides any taxpayer who has no other reportable foreign financial accounts for the year in question and who qualifies for the filing relief provided in the notice, 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.
For further information, please contact Eva Mruk, Director of Tax Compliance, at 212-867-4000 or emruk@loebandtroper.com.
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