By June 30, 2012, every U.S. person (i.e., each U.S. citizen, U.S. resident, and entity formed in the United States) who owns or controls a foreign financial account must report those accounts to the IRS on TD Form 90.22-1 (the FBAR form) if the value of the accounts totaled more than $10,000 at any time during calendar year 2011.
Generally, a U.S. person is considered to own or control a foreign financial account, and consequently may have to file the FBAR form, if either: (1) the person is the owner of record (has legal title) to the account; (2) the person is the grantor, or treated as the grantor, of a trust that owns the account; or (3) the person owns, directly or indirectly, more than 50 percent (by vote or value) of the stock in a corporation, or profits or capital interest in a partnership (or an entity treated as a partnership), or any other entity that owns the account. In addition, with limited exceptions, a U.S. person that is an individual is considered to control a foreign financial account if the individual has signature authority over the account, even though the account may be owned by another person.
Notwithstanding the rules above, a U.S. person generally does not have to file the FBAR form if the foreign financial account is: (1) owned by a government entity; (2) owned by an international financial institution of which the United States is a member; (3) an account in a U.S. military banking facility (or U.S. military finance facility) operated by a U.S. financial institution designated by the U.S. government to serve U.S. government installations abroad; or (4) a correspondent or nostro account that is maintained by a bank and used solely for bank-to-bank settlements. The charts found in our April 22, 2011 Tax Alert, "Preparing to File Report of Foreign Financial Accounts by June 30, 2011" provide a more complete overview of the FBAR rules.
In addition, those persons who were able to defer filing the FBAR form in 2011 with respect to foreign financial accounts they owned or controlled during 2010 must file the FBAR form with respect to the accounts they owned or controlled during 2010 by June 30, 2012. Last year, the IRS permitted certain U.S. persons who were required to file the FBAR form to defer filing the FBAR form until June 30, 2012. The extension was aimed at U.S. citizens and residents who had signing authority over, but no financial interest in, foreign financial accounts maintained by their employer. The extension principally applied to employers that are public companies and companies that are subject to government oversight, such as banks, SEC regulated companies, registered investment advisors, and their subsidiaries. The examples listed in our June 3, 2011, Tax Alert, "Certain FBAR Filings Deferred until June 30, 2012" provide a more complete overview of who was permitted to defer filing the FBAR form.
Pepper Perspective: The deadline for filing the FBAR form is quickly approaching. U.S. persons who are required to file an FBAR form with respect to accounts they owned or controlled during 2011 must do so by June 30, 2012. In addition, U.S. persons who were required to file an FBAR form with respect to accounts they owned or controlled during 2010 but who were able to defer filing the FBAR form must file the FBAR form with respect to the accounts they owned or controlled during 2010 by June 30, 2012.
Joan C. Arnold and Paul D. Pellegrini