IRS Extends FBAR Filing Deadline For More Taxpayers

by Mike Godfrey, Tax-News.com, Washington

12 August 2009

The US Internal Revenue Service (IRS) has issued a Notice which extends the deadline for reporting foreign bank and financial accounts (FBAR) for US persons having signature authority over, but no financial interest in, foreign financial accounts or commingled funds.

Any US person who has a financial interest in or signature authority, or other authority, over any financial account in a foreign country, if the aggregate value of these accounts exceeds USD10,000 at any time during the calendar year, is required to file an FBAR (Form TD F 90-22.1). The form must be filed regardless of whether the foreign account generates any income.

The current instructions to the FBAR provide, with certain exceptions, that US persons that have signature authority over, but no financial interest in, a foreign financial account are required to file an FBAR. These persons must report the account on an FBAR even if the foreign financial account is reported on an FBAR filed by the owner of the account (or other person that has a financial interest in the account).

The current instructions to the FBAR also provide that a foreign financial account that must be reported on an FBAR includes any bank, securities, securities derivatives, or other financial instruments account. The FBAR instructions further provide that those accounts "generally also encompass any accounts in which the assets are held in a commingled fund and the account owner holds an equity interest in the fund (including mutual funds).”

The current instructions to the FBAR further provide that Form TD F 90-22.1 with respect to a given calendar year must be filed with the Department of the Treasury on or before June 30 of the succeeding year. Thus, except as provided in the prior relief granted by the IRS, FBARs with respect to the 2008 calendar year should have been filed on or before June 30, 2009.

However, the IRS announced in Notice 2009-62 that:

“In light of the additional time needed for the Department of the Treasury to address issues pertaining to FBAR filing requirements and the need to provide administrative relief for persons with signature authority over, but no financial interest in, a foreign financial account, and persons with a financial interest in, or signature authority over, a foreign commingled fund, this Notice provides that those persons have until June 30, 2010, to file an FBAR for the 2008 and earlier calendar years with respect to these foreign financial accounts. Thus, eligible persons that avail themselves of the administrative relief provided in this Notice may need to file FBARs for the 2008, 2009 and earlier calendar years on or before June 30, 2010, to the extent provided in future guidance.”

“The FBAR filing extension provided by this Notice applies to FBARs with respect to 2008 and earlier calendar years. For (i) persons with signature authority over, but no financial interest in, a foreign financial account, and (ii) persons with a financial interest in, or signature authority over, a foreign commingled fund, the FBAR filing extension provided in this Notice supplements the filing extension to September 23, 2009, previously provided by the IRS on its public website.”

“The Department of the Treasury is interested in receiving comments on the following issues affecting a person’s FBAR filing obligation. The Department of the Treasury requests comments regarding when a person with signature authority over, but no financial interest in, a foreign financial account should be relieved of filing an FBAR for the account. For example, comments are requested regarding whether relief from filing would be appropriate if a person with a financial interest in the account has filed an FBAR.”

“The Department of the Treasury requests comments discussing in what circumstances the exception from FBAR filing currently available for officers and employees of banks and certain publicly-traded domestic companies might be expanded to apply to all officers and employees with only signature authority over, and no financial interest in, an employer’s foreign financial account, including circumstances in which an individual has been advised that an FBAR has been filed with respect to a foreign financial account for which that person has signature authority. The Department of the Treasury also requests comments discussing how the bank and publicly-traded company exception (including the requirement of notification that an FBAR was filed by a US person with a financial interest in the account) might apply to officers and employees with only signature authority over accounts owned by clients of their employer.”

“The Department of the Treasury requests comments concerning when an interest in a foreign entity (e.g., a corporation, partnership, trust, or estate) should be subject to FBAR reporting. For example, comments are requested regarding the possibility of applying the principles of sections 1297 and 1298(b) of the Internal Revenue Code to determine when an interest in a foreign entity should be subject to FBAR reporting. Comments are also requested regarding whether the passive asset and passive income thresholds of 50% and 75%, respectively, are appropriate and whether the tests should apply conjunctively.”

“The Department of the Treasury also requests comments on whether a US person should be relieved from an FBAR filing requirement with respect to a foreign commingled fund in other circumstances, such as when filing would be duplicative of other reporting.”

Interested persons should submit comments with regards the guidance on FBAR reporting by October 6, 2009.

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