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Have you filed your FBAR for 2015 yet?

26 Jun

You have? Good. Next year you’d better do it earlier because they have changed the deadline, moving it up to the same day as 1040 filing, April 15th. For we expats living overseas, it will actually be well before the automatic extension the IRS gives us. Below is an article written by Roger Russell from the June 16, 2016 issue of Accounting Today which is published online.

He writes, “This may be the last time you see a reminder that the FBAR (Report of Foreign Bank and Financial Accounts) filing deadline of June 30 is fast approaching. That’s because, beginning in 2017, the annual FBAR filing will coincide with the April 15 income tax filing deadline.” This reminds me of the lyrics from a Tom Lerher song entitled Nicolai Ivanovitch Lobachevsky with refer to Tchaikovsky at the age of 10 not playing in the streets of St. Pertersburg like the other children………………because when he was 5, his parents moved to Minsk!!!!

Unlike the April 15 deadline for filing income tax returns, the upcoming June 30 deadline is cast in stone for filing an FBAR to report ownership interests in or signature authority over foreign financial assets, according to Barbara T. Kaplan, shareholder and co-chair of the Global Tax Practice at Greenberg Traurig LLP.

“Timely mailing is timely filing when it comes to a taxpayer’s income tax return, but that is not true of the FBAR filing,” Kaplan said. “If you mail your income tax return on April 15 and it arrives at the IRS office on April 18, you have met the filing deadline. When it comes to the FBAR, however, that filing must be received by the Treasury on or before June 30 this year—period.”
(see my comment below)

And while taxpayers can request a six-month extension to October to file their income tax returns, no such extension is allowed for the FBAR filing. “However, these taxpayers on extension are the ones most likely to forget and miss this year’s June 30 FBAR deadline,” she observed.

At the bottom of Schedule B there are questions concerning foreign financial accounts (including brokerage accounts, bank accounts, insurance with cash value and other less obvious financial accounts) that relate to these foreign assets and direct the taxpayer to report on an FBAR. “Taxpayers on an extension usually never get to Schedule B until after the June 30 FBAR deadline has passed, and thus may be unaware of the FBAR filing requirement,” she said.

By the time they learn about the FBAR, the filing deadline has passed and the FBAR penalty can be imposed. Less sophisticated tax preparers may also not be paying attention to their client’s June 30 FBAR deadline.”

Beginning in 2017, not only will the annual FBAR filing coincide with the April 15 filing deadline, extensions will be permitted.

Beyond this harmonization of due dates, FBARs continue to generate broader compliance issues and related planning concerns, according to Kenneth P. Brier, CPA, Esq., a partner at Brier & Ganz LLP. “Given the draconian penalties for noncompliance, clients and advisers need to keep their guard up,” he said.

“Tax preparers appropriately rely on their clients to tell them if they have a financial interest in, or signature or other authority over, a reportable foreign account,” he added. “But a client may be completely unaware of such an interest or authority.”

A case in point, he observed, is where a client is designated as the agent of a third party owning a foreign account. “This could, in principle, create an FBAR filing responsibility,” he said. “Although the account is not titled in the name of the agent, the agent could have authority, even if shared, to control the disposition of money, funds or other assets.”

This has important implications for durable powers of attorney, Brier indicated.

“If Aunt Louise holds a foreign account above the $10,000 threshold and has signed a DPOA naming her nephew as her agent, then the nephew, in principle, could have an FBAR filing obligation whether he knows it or not,” Brier cautioned. “Actual signature authority might depend on whether the foreign country will recognize a U.S. DPOA, but who wants to chance the answer to that question? Though it is hard to see how the IRS could be so hard-hearted as to assess a non-filing penalty on such an innocent, it makes sense to avoid that possibility altogether.”

Brier suggested that a durable power of attorney specifically exclude any power over any foreign account unless the agent has expressly accepted such power. “That should avoid the problem of an inadvertent signature authority,” he said. “It is worth reviewing any DPOA for which a client knows another party has designated him or her as agent, to make sure it contains such an exclusion. Here a CPA can play a critical role as watchdog for the client, coordinating with the client’s lawyer as needed.”

My comment to the article corrected a misleading implication about mailing the FBAR and is as follows,”According to you, Barbara T. Kaplan said, “If you mail your income tax return on April 15 and it arrives at the IRS office on April 18, you have met the filing deadline. When it comes to the FBAR, however, that filing must be received by the Treasury on or before June 30 this year—period.”

But there is NO MAILING OF THE FBAR and there hasn’t been for a couple of years. It can ONLY BE FILED electronically online. This year, if you do it on or before June 30th, your are in full compliance with the The Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury.”


Paperwork and Punishment: It’s Time to Fix FBAR

6 Jan

Long Arm of IRS to Expats

Paperwork and Punishment: It’s Time to Fix FBAR” is an academic paper published in Tax Notes International in October 2014 by Allison Christians, Associate Professor who holds the H. Heward Strikeman Chair in Tax Law at McGill University Faculty of Law. In it she vividly details the fallacy of FBAR as a tool to catch criminals, tax evaders, money launderers and terrorists. To wit, the responsibility for collecting the Foreign Bank Account Report has been handed over to FinCEN, Financial Crimes Enforcement Network, described by the Treasury Department as the Financial Intelligence Unit of the United States. Thus there is a criminal stigma associated with entering oneself in a crime enforcement registry. In her introduction, she states, “Unfortunately, its increasingly draconian requirements and consequences now apply to millions of innocent bystanders who are collateral damage in the ongoing battle against financial crime. Their inclusion in the FBAR regime is a massive waste of both government and taxpayer resources, effectively criminalizing activities that are wholly unconnected to financial crime, and perversely discouraging compliance. All of this is unnecessary because as the administrator of FBAR, Treasury can immediately fix the problems. The difficulty is that FBAR is still relatively obscure to those not caught in its grasp, and the extent of the damage it is doing to U.S. taxpayers and to the integrity of the tax system is thus under-appreciated. This damage is real, but it can be reversed by re-focusing FBAR where Congress intended: on likely criminal activity. In short, this Essay demonstrates that the FBAR regime is broken and it is time for Treasury to fix it.

Did you know that the FBAR came about as part of the Bank Secrecy Act of 1970? The $10,000 threshold for requiring that all foreign financial institution accounts be reported has not changed since it was first chosen as the criterion for reporting. With no inflation adjustment, its impact has significantly broadened over the years, and it now inflicts huge penalties on millions of individuals who should never have been in its sights. Had it been inflation adjusted, it would require you to list all your foreign accounts if their total reached approximately $50,000.

U.S. persons  living  permanently  in  other  countries  may  disagree  with  the  U.S. policy of taxing citizens on a global basis. A harsh regime that involves extensive and duplicative financial reporting with a criminal stigma attached is a recipe for deepening resentment. If the United States takes the sensible route in adopting residence based taxation, the extreme cost of FBAR filing, measured in dollars and time spent as well as an increasingly fragile taxpayer morale, will disappear along with millions of unnecessary annual returns showing no tax owed. This will free up scarce administrative resources, allowing the IRS to turn its focus where it belongs; on those who are determined to cheat and evade the system to the detriment of everyone. Until then, it is in the  interest of al  taxpayers, the IRS, and the  income  tax  as a whole that FBAR compliance be a  normal rather than criminal experience, and that it be no more difficult or draconian than is absolutely necessary.

FBAR Electronic Filing is Here (weither you like it or not)

27 Feb

Where have I been? When did all this come about? Now, the ONLY way to file your mandatory FBAR (Foreign Bank Account Report) is from your computer via the internet!!! What about those people who don’t have a computer? What about those that don’t have internet connectivity? What? Go to an Internet Cafe where someone can easily steal all your private financial information? I suppose the future is now!

To go back a bit, I will describe to you how I found this out. For some reason or other, there I was today, wondering if the time had come that I would be able to electronically file my TD F 90-22.1. I did a search for “e file fbar” and the first web site of the 247,000,000 search results was to the IRS web page which informed that “the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing electronically a Financial Crimes Enforcement Network (FinCEN) Form 114.”


What was this FinCEN? I had never heard of them, so I went to the Financial Crimes Enforcement Network home page. It is the first cousin of the IRS — the other arm of the U.S. Treasury, whose mission it is “to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.” Little did I know that all those years that I have been reporting my FBAR to what I thought was the IRS, I have been playing a role in combating money laundering and protecting the national security of the U.S.A. Well, let me tell you, this year, I won’t grind my teeth as I meticulously fill out my FBAR, wondering why Uncle Sam’s money collectors want to know about my measly pension fund and checking account over here in Israel. So electronically file my BSA forms with FinCEN I will, and with a great deal of pride that I am doing my small part for protecting the freedom of America.

And for those of you out there in EXPAT-land, you can access these interactive BSA forms at the FinCEN by merely clicking here and then click on this icon:Download FBAR(FinCEN Form 114)