IRS Reminds Dual Citizenship Taxpayers to Report
Foreign Accounts

 
The IRS recently reminded dual citizenship taxpayers and U.S. citizens residing abroad to file U.S. income tax returns and, if appropriate, Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).  The reminder, posted on the IRS website, is part of the agency's ongoing campaign to heighten awareness about reporting foreign accounts.

Who is Required to File an FBAR?
A U.S. citizen or resident, as well as other U.S. persons, must file an FBAR if:

• The U.S. person had a financial interest in or signature authority over at least one financial account located outside of the U.S.; and
• The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.

A foreign financial account includes a bank account, brokerage account, mutual fund, trust, or other type of account. The filing deadline is June 30 of the succeeding year.

What if There was Reasonable Cause Not to File?
The IRS goal is to increase compliance, and not to penalize or overly burden taxpayers. For example, individuals who fail to file a U.S. income tax return or to pay the taxes due may be subject to penalties under Code Sec. 6651. The penalty is a percentage of the taxes due; there is no penalty if no tax is due.

Additionally, taxpayers who do owe taxes will not have to pay a penalty if their failure to file or pay is due to reasonable cause and not willful neglect. Reasonable cause is satisfied if the taxpayer exercised ordinary business care and prudence in meeting his or her tax obligations. Reasonable cause may also be established where the taxpayer shows that he or she was not aware of specific obligations to file returns or pay taxes.

What are the Penalties for Failure to Comply?
In the absence of reasonable cause, however, a taxpayer who fails to file an FBAR may be subject to a willful or non-willful civil penalty. Penalties for a willful violation are the greater of $100,000 or 50 percent of the total in the foreign account. Penalties for a non-willful violation can be as high as $10,000. The IRS can issue a warning letter rather than assert a penalty.

Taxpayers who realize they should have filed FBARs for earlier years to file the delinquent FBARs should attach a statement explaining the late filing. The IRS will not assert penalties if the taxpayer had reasonable cause for filing late.

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To ensure compliance with requirements imposed by the IRS, please note, any advice contained in this publication was 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 addressed herein. This publication is distributed with the understanding that the publisher and distributor are not providing legal, accounting or other professional advice and assume no liability whatsoever in conjunction with the information contained within this publication.