The IRS has been aggressive lately in pursuing tax cheats that have concealed resources in offshore accounts. Penalties for not reporting the occurrence of foreign accounts are steep, which worries even honest companies and people that are uncertain about their filing obligations.
Normally, U.S. taxpayers with a financial interest in foreign financial accounts must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (often known as the "FBAR"), once the aggregate value of these accounts exceeds $10,000 at any time during a calendar year. Such accounts include, but aren't limited to, checking, savings, securities, brokerage, mutual fund and other pooled investment balances held outside America. Folks with signature authority over, but no financial interest in, one or more accounts with the exact qualifications must file an FBAR also. This latter requirement has caused much confusion and concern among executives with some amount of discretion over their companies' foreign financial accounts.
These regulations became effective on March 28 and use to FBAR filings Reporting Accounts foreign financial accounts kept in the calendar year 2018 and for all subsequent years.
These new regulations specifically apply to individuals who have signature authority over foreign financial accounts and that correctly deferred their FBAR filing duties for calendar years 2009 and earlier. The deadline for these people to file the FBAR was extended until Nov. 1, 2011.
In this initiative, the IRS provided a uniform penalty structure for taxpayers that came forward to report previously undisclosed foreign accounts, in addition to any unreported income generated or held in these accounts, during tax years 2003 through 2010. Despite the fact that the window to take part in the program has closed, the initiative's FAQs make clear that those with just signature authority on foreign accounts should still file delinquent FBAR reports.
The final regulations define trademark or other authority as follows:
"Signature or other authority means the authority of an individual (alone or along with another) to control the disposition of cash, funds or other assets held in a financial account by direct communication (whether in writing or otherwise) to the individual with whom the bank is preserved."
By the definition, executives and other employees are not always required to file an FBAR only because they have jurisdiction over their company' foreign financial accounts. Under the final regulations, the Financial Crimes Enforcement Network (FinCEN) grants relief from the duty to report trademark or other authority over a foreign financial account to the officers and employees of five types of entities which are subject to specific types of Federal regulation. One of these classes are publicly traded companies listed on a U.S. national securities market, and businesses with more than 500 shareholders and more than $10 million in assets. For publicly traded companies, officers and employees of a U.S. subsidiary might not have to submit an FBAR either, provided that the U.S. parent company files a consolidated FBAR report that contains the subsidiary. These exceptions only apply when the employees or officers do not have a financial interest in the accounts in question.