IRS Extends FBAR Deadline
posted Jun 16, 2011 by Paul Oliveira, CPA
IRS extends FBAR deadline for certain filers with signature authority
On June 16, the IRS released Notice 2011-54, which provides additional time for certain individuals with signature authority over (but no financial interest in) foreign financial accounts to file Form TDF 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The four-month extension, from June 30, 2011, to Nov. 1, 2011, is limited to FBARs for 2009 or earlier years that were properly deferred in accordance with previous IRS notices. Reports for accounts held in 2010 continue to be due by June 30, 2011. Here’s a closer look at Notice 2011-54 and how it coexists with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) Notices 2011-1 and 2011-2, as well as certain IRS voluntary disclosure programs.
Starting with passage of the Bank Secrecy Act of 1970, the Treasury Department has had the authority to require reporting of foreign financial accounts. In 2003, however, FinCEN delegated FBAR enforcement authority to the IRS, and the IRS has stepped up its enforcement activities in recent years.
FBAR rules require U.S. citizens, residents and entities to file annual reports disclosing financial interests in — or signature or other authority (“signature authority”) over — foreign financial accounts with an aggregate value greater than $10,000. FBARs for a calendar year are due by June 30 of the following year. But unlike other filings, which must be postmarked by the due date, FBARs must be received by the IRS by the June 30 deadline.
In February 2011, FinCEN issued final regulations providing detailed guidance on who must file FBARs and what information must be disclosed. The final regulations provide, for example, that signature authority includes the ability to control an account through oral or other nonwritten communication.
The regulations also provide an exception for officers and employees of certain “regulated entities,” including public companies, regulated financial institutions and Authorized Service Providers (ASPs). ASPs are entities that are registered with and examined by the SEC and
provide services to registered investment companies.
An officer or employee with signature authority over (but no financial interest in) a foreign account owned directly by a regulated entity isn’t required to file an FBAR. For ASP officers and employees, however, the exception applies only to accounts of clients that are registered investment companies
To avoid confusion while FinCEN was developing its FBAR guidance, the IRS issued two notices (2009-62 and 2010-23) deferring the filing deadline to June 30, 2011, for persons with signature authority over (but no financial interest in) foreign accounts held in 2009 or earlier
IRS Notice 2011-54
When the FBAR regulations were finalized, FinCEN and the IRS indicated that individuals with signature authority over foreign accounts were expected to comply beginning June 30, 2011. The two agencies were informed, however, that many of these individuals were having difficulty compiling the information they need to file complete and accurate FBARs with respect to 2009 and earlier years.
To relieve this burden, the IRS issued Notice 2011-54, which, as mentioned, extends the deadline for these years (again, not for 2010) to Nov. 1, 2011.
FinCEN Notice 2011-1
IRS Notice 2011-54 doesn’t affect the one-year extension provided by FinCEN Notice 2011-1. That notice extended the filing deadline to June 30, 2012, for individuals who have signature authority over certain foreign accounts owned by regulated entities but who don’t qualify for the exception described above.
For example, an officer or employee of a regulated entity might have signature authority over a foreign account owned by a “controlled person” — that is, an entity in which the regulated entity has a more than 50% ownership interest. The exception doesn’t apply because the regulated entity doesn’t own the foreign account directly.
Similarly, an officer or employee of a controlled person might have signature authority over a foreign account owned by the parent or a controlled person. The exception wouldn’t apply because the individual with signature authority isn’t employed by the regulated entity.
In light of confusion over the applicability of the exception in these situations, FinCEN granted the one-year extension to give affected individuals time to file FBARs.
FinCEN Notice 2011-2
On June 17, FinCEN issued Notice 2011-2, extending the June 30, 2011, FBAR deadline to June 30, 2012, for certain ASP officers and employees. As noted above, the exception for ASPs applies only to accounts of clients that are registered investment companies.
Notice 2011-2 provides additional time for ASP officers and employees to file FBARs for foreign accounts of clients that are not registered investment companies.
Voluntary disclosure programs
Notice 2011-54 makes it clear that the relief it provides doesn’t affect the requirements or participation deadlines associated with the IRS’s 2009 Offshore Voluntary Disclosure Program or with this year’s Offshore Voluntary Disclosure Initiative (OVDI). These programs allow taxpayers with undisclosed foreign accounts to avoid criminal prosecution and obtain penalty relief by “coming clean.”
Under OVDI, for example, taxpayers with no underreported tax liabilities can avoid penalties for failure to file FBARs by filing all delinquent returns for 2003 through 2010 by Aug. 31, 2011. Notice 2011-54 doesn’t appear to extend this deadline.
Handle with care
FBAR requirements are complex, and failure to comply can result in substantial civil — and even criminal — penalties. If you have questions regarding Notice 2011-54, please give us a call. We’d be happy to help you determine whether you’re subject to FBAR filing requirements and, if so, whether you qualify for the deadline extension. Contact us to learn more.