FBAR CONSIDERATIONS. Possible Penalties for failure to file FBAR are $250, per violation and 5 years imprisonment.

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2 In recent years the United States has been more closely analyzing and scrutinizing the investments held by United States Residents and United States Persons for many reasons not all of which are tax related. One of the means by which the United States is keeping track of international investments and cash flows between individuals is through the Report of Foreign Bank and Financial Accounts or FBAR (Foreign Bank Account Report). Here we would like to explain the necessity of filing the FBAR, its background, and the information needed in order to be compliant with the United States regulatory environment. The Report of Foreign Bank and Financial Accounts goes all the way back to the Bank Secrecy Act (BSA) of This act gave the Department of the Treasury authority to establish a recordkeeping for US persons with any kind of financial interest or power over financial interest (signature authority). The Bank Secrecy Act had many considerations beyond tax implications for creating this recordkeeping requirement. For the most part however the FBAR serves the Internal Revenue Service in accomplishing its goal of narrowing the tax gap for United States Persons. Don t be caught unaware of your obligation to file the FBAR! Filing requirements exist for those with financial interest & signature authority over Foreign Financial Accounts.

3 United States law dictates that all Worldwide Income must be reported on the United States tax return and one measure that the IRS has implemented to ensure that this is accomplished is through the FBAR filing requirement. The FBAR is a form that must be filed if the individual holds Financial Assets in foreign accounts or has signature authority over a foreign account. Among many other reasons involving other types of international bank fraud, the FBAR also gives the IRS a means to monitor the taxpayer s financial progress over several years in order to also ensure that all income from all worldwide sources is being reported and that the applicable tax is being paid. There are of course many other reasons for the United States to require the FBAR filings, terrorism protection, money laundering, are just some of the reasons why the United States requires this form. However the main concern for the tax accountant and the IRS for ensuring that the FBAR gets filed is because it ensures that income from international sources is in fact being reported properly on the United States return by United States Persons. The consequences of not filing are fairly severe. The worst that can happen to a non-compliant taxpayer is a $250, per violation and up to 5 years in prison. It is therefore generally considered to be in the best interest of the taxpayer to file the FBAR when it is due. Possible Penalties for failure to file FBAR are $250, per violation and 5 years imprisonment.

4 Who needs to file an FBAR? Any United States Person who has had a financial interest or signature authority over a bank account and where those aggregate balances were greater than $10, during the calendar year. The FBAR is due every year on June 30th for the preceding calendar year ending December 31st. United States person means United States citizens; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States. (IRS 6/12/12) There are a number of programs that currently exist for those individuals whom did not know of this filing requirement so as to avoid a penalty. These programs are mostly concerned with those whom have had signature authority in a foreign bank account in the past and as a result of not having any true ownership of the assets were under the mistaken assumption that no filing requirement was necessary. The Report of Foreign Bank and Financial Accounts (FBAR) is due by June 30 th!

5 All individuals should be advised however that the FBAR requirement exists for them if they have either signature authority or financial interest in a financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account and if the aggregate amounts are greater than $10, at any time during the year. It is important to also note that this is not the aggregate total of the final balance amounts on December 31st of the calendar year but rather the maximum amounts at any time during the year, as these will be the amounts that are reported on the FBAR. If an individual meets the aforementioned conditions then the Bank Secrecy Act requires you to report the account yearly to the Internal Revenue Service by filing Form TD F , Report of Foreign Bank and Financial Accounts (FBAR). In conclusion, if an individual has a foreign interest or signature authority in foreign assets and bank accounts they should consider seeking the help of a United States Tax Practitioner in order to bring their full tax situation and financial situation into the proper perspective, context and framework of the United States system and enhance their compliance under that law. There are no Extensions possible for the FBAR, without exception it must be received by the IRS in Detroit by June 30 th.

6 To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document. Prepared by Paul Boland, EA A Member of Sycamore Consulting, Inc.