Severe penalties to the tune of $10,000 and up as well as unclear requirements have prompted additional guidance on foreign bank account reporting. Proposed regulations were issued on February 26, 2010, but won’t go into effect until they are finalized. Until then, the IRS has issued a few notices and announcements for 2009 and 2010.
Taxpayers who have signature authority over, but no financial interest in a foreign bank account now have until June 30, 2011 to report their authority over foreign accounts in calendar year 2010 and prior calendar years. The IRS has also issued relief for certain foreign commingled funds. Interest in private investment vehicles, like private equity funds and hedge funds, will not be considered foreign financial accounts and are not required to be reported for 2009 or prior years. There has been no word on whether these funds will be required to be reported in 2010 and future years.
Accounts that are reportable on Form 90-22.1 include bank accounts, securities accounts, insurance policies with a cash value or annuity policy, and other accounts maintained with a foreign financial institution. If you own or have legal title over a foreign bank account, or have more than a fifty percent ownership in a corporation, partnership, or trust that has financial interest in a foreign bank account, then you must report this ownership. In addition to owning 50% or more of a trust, if you are a mere beneficiary who receives greater than 50% of the distributions, then you are required to file the 90-22.1. The IRS is strongly focusing on enforcement of foreign bank account reporting, so be sure to check with your tax advisor if you are unsure of your filing requirements.
Jill A. Helm, CPA