Foreign Bank Account Reporting
There is still time to comply for calendar year 2010 Foreign Bank Account Reporting ("FBAR"), which is due June 30, 2011. Each US person with a financial interest in or signature authority over any foreign financial accounts, if the aggregate value of all accounts exceeds $10,000, must report that relationship for each calendar year by filing Form TD F 90-22.1 with the Department of Treasury on or before June 30 of the succeeding year. Additionally, the US person must indicate on line 7a of Schedule B of Form 1040 whether he or she has an interest in, or signature authority over, a foreign financial account. The 2011 Offshore Voluntary Disclosure Program ("OVDP") allows taxpayers who are not in compliance to voluntarily complete the required information reporting, amend applicable returns, if necessary, and pay the tax and reduced penalties provided for under the program. In exchange, the IRS reduces the penalties and will not pursue the taxpayer for criminal prosecution.
The penalty structure for the 2011 OVDP is somewhat higher than the penalty structure provided by the 2009 program. A participant under the 2011 program faces a 25% penalty on the highest aggregate balance of the account for the 2003 through 2010 calendar years. However, there is a reduced rate penalty category of 12.5% for taxpayers whose offshore accounts do not have more than $75,000 in assets. Taxpayers participating in the initiative must file all original and amended tax returns, and include payment for taxes, interest, and accuracy-related penalties, by the August 31, 2011 deadline.
There is no prosecution protection for taxpayers who attempted to make a "quiet" disclosure by filing amended returns, reporting their unreported income, but without making a voluntary disclosure. For taxpayers who properly reported all taxable income but were unaware of the requirement to file Form TD F 90-22.1, the taxpayer does not have to use the voluntary disclosure process; the taxpayer simply has to file the delinquent Form(s) TD F 90-22.1.
