Even though the June 30, 2009 filing deadline for the receipt of Treasury Form TD F 90-22.1 (Foreign Bank and Financial Accounting Reports (FBAR)) has passed, the IRS announced a Voluntary Disclosure Program for Offshore Accounts and Income which permits the filing of late and amended FBARs for the previous six years under certain circumstances up through September 23, 2009. Organizations that recently learned of their FBAR filing obligation and had insufficient time to gather the necessary information to complete the FBAR by the deadline, should file the delinquent FBAR report according to the instructions and attach a statement explaining why the report is filed late. The statement should include a reference to the organization's tax-exempt status (and purpose) and include specific mention of the recent IRS interpretation of the reporting requirements of foreign hedge funds and private equity funds.
The delinquent FBARs for all relevant years should be mailed by September 23, 2009, in duplicate to the following addresses:
Internal Revenue Service U.S. Department of the Treasury
11501 Roosevelt Blvd. P.O. Box 32621
South Bldg., Room 2002 Detroit, MI 48232-0621
Philadelphia, PA 19154
Attn: Charlie Judge, Offshore Unit, DP S-611
The definition of a financial account has been expanded and includes assets held in a commingled fund such as "mutual funds." Hedge funds, interests in foreign partnerships, and foreign feeder entities in master-feeder structures may presumably also be characterized as financial accounts. U.S. persons including exempt organizations and retirement plans who have a financial interest in foreign hedge funds and private equity funds are required to complete Parts I and III (as a joint-owner). Additionally, a separate filing is required for U.S. persons with signature or other authority over the foreign financial account. "Signature authority" generally includes the authority to control the disposition of the account's assets. "Other authority" includes the ability to exercise comparable power over an account by direct communication to the bank or other persons with whom the account is maintained, either orally or by some other means. U.S. persons with no financial interest but with signatory authority are required to file a separate FBAR completing Parts I and IV.
Non-willful failure to file an FBAR is subject to a penalty of up to $10,000; willful failure to file an FBAR is subject to a penalty equal to the greater of $100,000 or 50% of the amount of the transaction or of the balance of the account at the time of the offense. Willful failure to file an FBAR is also potentially subject to criminal penalties of up to $250,000 and five years imprisonment. The IRS stated that penalties for failure to timely file FBARs for prior years will not be imposed in cases where taxpayers reported and paid tax on all of their taxable income for those prior years and file FBARs by September 23, 2009.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
For further information, please contact Eva Mruk, Director of Tax Compliance, at 212-867-4000 or emruk@loebandtroper.com.
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