May 17, 2011
On February 23, 2011, the Treasury Department released final regulations for foreign bank account reporting (“FBAR”) that became effective March 28, 2011 and apply to FBAR compliance for calendar years 2010 and future years. On March 26, 2011, the IRS also issued revised FBAR forms and instructions to reflect the changes made by these new regulations. To see a previous Alert, which explains the final regulations in detail, please click here.
Who is required to file?
Consistent with prior FBAR guidance, any U.S. person with a financial interest or signature or other authority over a foreign financial account, where the combined value of all foreign financial accounts exceeded $10,000 at any time during the reporting year, will be required to file Form TD F 90-22.1.
When is the filing due?
The FBAR is not filed with the taxpayer’s federal income tax return. The FBAR (Form TD F 90.22.1) must be received by the IRS no later than June 30 of the year following the calendar year for which the filing is being made. There is no extension for filing the FBAR.
What are the some of the important aspects for fund managers and investors to note?
- An investor in a hedge fund or private equity fund is not required to file an FBAR solely by its investment in the fund. In previous years there was uncertainty as to whether these interests could be considered a “comingled fund” subject to reporting.
- Signatory authority applies only to an individual. In past years it was unclear whether or not a management company or general partner entity may be considered as having signatory authority.
- An individual must be able to directly control the disbursements of funds in order to be considered as having signatory authority. If that individual must first contact a third party and that third party then directs the financial institution to disburse funds the originating individual does not have signatory authority.
- A U.S. person has a financial interest in a foreign financial account when the U.S. person is the owner of record or holds legal title to the account, even if the account is maintained for the benefit of another person (i.e. nominee account). In these circumstances both the holder or record and the beneficial owner are required to file an FBAR.
- A U.S. person having a financial interest in 25 or more foreign financial accounts or having signatory authority over 25 or more foreign financial accounts is only required to provide the number of accounts and certain basic information. The U.S. person must maintain information on the accounts should the IRS request an inspection.
For more information, please call your EisnerAmper LLP tax professional.
This publication is intended to provide general information to our friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.