The IRS has released a fact sheet
reminding U.S. citizens and dual citizens of the United States and foreign countries who live abroad about U.S. filing requirements, including Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
Some dual-citizen taxpayers may have only recently learned about their obligation to file U.S. income tax returns or FBARs, the IRS said in the fact sheet.
Generally, FBAR must be filed by U.S. persons having a financial interest in or signature authority or other authority over any financial account in a foreign country if the aggregate value of the accounts exceeds $10,000 at any time during the calendar year. The normal annual filing date for FBAR is June 30. While the Association of Americans Resident Overseas estimates that some 6.32 million Americans live abroad, the Treasury Inspector General for Tax Administration reports that only a little more than 534,000 FBARs were filed in 2009.
FBAR discloses the foreign interest or account to the IRS and does not impose a tax, although failure to file it can incur penalties. Non-willful failure to file may be penalized by up to $10,000 per violation, unless the failure was due to reasonable cause. A willful failure to file can be subject to a higher civil penalty (up to $100,000 or 50% of the balance of the foreign account, whichever is greater) and criminal penalties.
In the fact sheet, the IRS gave examples of factors that, considered along with all the facts and circumstances, could point to reasonable cause for non-willful failure to file an FBAR and therefore a lesser or no penalty:
- Reliance upon the advice of a professional tax adviser who was informed of the existence of a foreign financial account;
- A lack of any intentional effort to conceal income or assets related to an unreported foreign account that was established for a legitimate purpose; and
- A lack of any material tax deficiency related to an unreported foreign account.
The fact sheet reminds taxpayers that Foreign Account Tax Compliance Act reporting of specified foreign financial assets on income tax returns will be required starting in 2012.