New FBAR Rules Could Be On the WayNews
Posted in on July 13, 2016
Each year, taxpayers with offshore accounts are required to file Reports of Foreign Bank and Financial Accounts (FBARs). Failure to file these reports can have significant consequences, including substantial financial penalties. That said, anyone with money offshore needs to know the rules and comply with them.
Soon, the rules may be changing. The U.S. Financial Crimes Enforcement Network (FinCEN) issued a Notice of Proposed Rulemaking recently. The proposed rule would amend certain provisions related to filing FBARs.
A Maryland tax lawyer can provide information to offshore accountholders on the proposed rule, as well as on any developments connected with FBAR filings. You should contact an attorney for help if you are not certain how to comply with all U.S. tax requirements related to your funds kept offshore.
Notice of Proposed Rulemaking Could Change FBAR Requirements
FBARs have to be filed by any U.S. person who has a financial interest in a bank account or investment account (with a value of $10,000 or greater) that is maintained offshore. Starting in 2016, the deadline for FBARs was set for April 15, 2017 for 2016 accounts and April 15 for each year following the current reporting year (for example, in 2017, accounts would need to be reported by April 15, 2018).
Many people are, unfortunately, unaware of the fact they must file FBARs. There is also confusion over exactly who has to file FBARs on the basis of having a financial interest in an offshore account.
In general, “financial interest” is interpreted broadly. FBARs have to be filed by someone who has signature authority or any authority over any financial account valued at $10,000 which is maintained at a non-U.S. Bank. However, in 2011, FinCEN issued a rule making FBAR compliance easier for people with signature authority only.
Those with signature authority over 25 or more foreign financial accounts would only be required to provide basic information and not complete the detailed form for each account, unless more information was specifically requested by the IRS.
The recent Notice of Proposed Rulemaking (NPRM) also addresses the obligations of officers and employees who have only signature authority. The NPRM was issued in response to a decision to provide a simplified and expanded exemption to reduce the burden on FBAR filers.
Under the new rule, if it becomes effective, agents, employees, officers and others with signature authority may no longer actually need to file FBARs at all.
Those with only signature authority who have that authority due to their employment would be excused from having to file FBARs, as long as those accounts are already required to be reported by an employer.
The exemption applies only to officers and employees with overlapping signature authority, where the employer or other entity with the same corporate structure as the employer has to report the accounts.
If there is no one else within the corporate hierarchy who has to report the accounts, the person with signature authority would still need to file FBARs. This could happen, for instance, if a U.S. person is employed by a foreign entity that isn't included as a subsidiary of a U.S. entity that submits FBARs.
Kevin Thorn, a tax lawyer in Maryland, can provide information to those who are signatories on accounts and are concerned about whether they have to file FBARs on their accounts under both current and proposed new rules. Contact our office today to discuss your situation.Share This Post