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Tax Alert: FBAR filing deadline June 30, 2011; Minor extension for certain financial professionals

You are required to file a Report of Foreign Bank and Financial Accounts (FBAR) if you have a financial interest in, or signature authority over, one or more financial accounts, including bank, securities and other types of financial accounts in a foreign country, and the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. The FBAR must be filed by June 30 of each year and must be filed separately from your tax return.

The Internal Revenue Service and the Financial Crimes Enforcement Network recently announced that a small subset of individuals with only signature authority required to file the FBARs will receive a one-year extension beyond the upcoming filing date of June 30, 2011. Notice 2011-1 extends the deadline until June 30, 2012, for the following individuals:

  • An employee or officer of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a controlled person).
  • An employee or officer of a controlled person of a covered entity who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.
  • All other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011, filing date. Unlike with federal income tax returns, extensions of time to file are not available.

If you fail to file an FBAR, you could be subject to criminal penalties, such as a prison term of up to 10 years and a fine of up to $500,000, and civil penalties, such as a monetary penalty of up to the greater of $100,000 or 50 percent of the total balance of the foreign account for each willful violation or a monetary penalty of up to $10,000 for each non-willful violation.

If you were required to file an FBAR for prior years and have failed to do so and have not been reporting your foreign income on your U.S. federal income tax returns, please see our alert, Last Call for Disclosure of Offshore Assets; IRS Opens a Second Special Voluntary Disclosure Initiative for Offshore Assets, regarding the 2011 Offshore Voluntary Disclosure Initiative, which requires action as soon as possible.

If you have any questions about filing FBARs or about reporting unreported foreign financial accounts, please contact:

David M. Kall
216.348.5812
dkall@mcdonaldhopkins.com

Susan M. McGlone
216.430.2022
smcglone@mcdonaldhopkins.com

or any of our tax attorneys by clicking on the Tax Practice Group link below:

Tax Practice

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