The US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) announced the fourth in a series of deadline extensions for certain required filings in relation to foreign assets. FinCEN Notice 2012-2 extends the filing date for some filers of Form TD F 90-22.1, "Report of Foreign Bank and Financial Accounts (FBAR)," from June 30, 2013, to June 30, 2014.
FBAR reporting requirements
The identification of foreign financial accounts on an FBAR creates a financial trail that assists law enforcement and other agencies. US taxpayers are required to file an FBAR with the IRS by June 30 of the following year for each year that:
- They had a financial interest in or "signature or other authority" over at least one financial account located outside of the United States, and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
FBAR regulations define "signature or other authority" as the authority of an individual (alone or in conjunction with another) to control the disposition of money, funds, or other assets held in a financial account by direct communication (whether in writing or otherwise) to the entity with whom the account is maintained. The test for whether an individual has such authority, and is therefore subject to FBAR reporting requirements, is whether the foreign financial institution will act on a direct communication from that individual regarding the disposition of assets in the account.
Exceptions from the reporting requirements
The regulations provide several exceptions from the reporting requirements for individuals with signature or other authority. Assuming they don’t have a financial interest in the account, the following authorized individuals need not file an FBAR:
- An officer or employee of a bank examined by the Office of the Comptroller of the Currency or any other federal banking regulator, for an account owned or maintained by the bank,
- An officer or employee of a financial institution that’s registered with and examined by the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission, for an account owned or maintained by the financial institution,
- An officer or employee of an SEC-registered and -examined authorized service provider (such as an investment advisor) to a registered mutual fund, for an account owned or maintained by the mutual fund,
- An officer or employee of a domestic or foreign entity with a class of equity securities listed on any US national securities exchange, for an account of the entity (or of a US subsidiary of the entity, as long as the subsidiary is named in the parent company’s consolidated FBAR), and
- An officer or employee of an entity that has a class of equity securities registered under the Securities Exchange Act, for an account of the entity.
The exceptions seem to be causing some confusion. According to FinCEN, it continues to receive questions that require additional consideration regarding the exceptions. In particular, some employers have expressed concern that the exceptions don’t apply to employees who have signature authority over the account of an entity that’s in their employer’s controlled group but isn’t actually the employee’s employer. So FinCEN decided to extend the deadline again for some filers.
Previous deadline extensions
FinCEN had already issued three earlier extensions:
- On May 31, 2011, it issued Notice 2011-1, which extended to June 30, 2012, the due date for filing an FBAR for certain individuals with signature authority over, but no financial interest in, one or more foreign financial accounts—specifically, individuals whose filing requirements might be affected by the exceptions.
- Little more than two weeks later, on June 17, 2011, FinCEN released Notice 2011-2, similarly extending the due date for certain officers or employees of investment advisors registered with the SEC who have signature authority over, but no financial interest in, certain foreign financial accounts.
- Almost a year ago, on Feb. 14, 2012, FinCEN issued Notice 2012-1. That notice extended to June 30, 2013, the FBAR filing date for those individuals whose filing deadline was previously extended in accordance with Nos. 1 and 2, above—that is, those with signature authority over, but no financial interest in, one or more foreign financial accounts.
With Notice 2012-2, FinCEN extends the filing date another year for individuals whose filing due date for reporting signature authority was previously extended by Notice 2012-1. The extension applies to the reporting of those holding signature authority during the 2012 calendar year, as well as the reporting deadlines extended by Notices 2011-1 and 2011-2. All other individuals with an FBAR filing obligation, however, still must file by June 30, 2013.
If you hold offshore financial accounts or have signature authority over them, proper reporting to the IRS is rapidly becoming critical to avoiding costly penalties, particularly as foreign financial institutions begin reporting on such accounts. To ensure you are in compliance, or if you have questions regarding any of the foreign financial asset reporting regulations, please contact your Baker Tilly advisor.