Foreign Bank Account and Other Foreign Information Return Developments

The IRS on June 24 released 20 new updated frequently asked questions (FAQs) on its offshore income voluntary disclosure program (VDP) and foreign bank and financial accounting reports (FBAR). The IRS also provided to the AICPA FBAR Task Force the street address for FBAR submissions by private delivery services:

IRS Detroit Computing Center

Attn: FBAR Mail Room, 4th Floor

985 Michigan Ave.

Detroit, MI 48226

Advertisement

The contact phone number for the delivery service is 313-234-1062.

The IRS announced a telephone hotline for FBAR questions (800-800-2877, option 2), an e-mail address (FBARQuestions@irs.gov) and a VDP hotline (215-516-4777).

As a reminder, TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), must be filed by U.S. persons (including U.S. corporations owning more than 50% of a controlled foreign corporation (CFC)) having a financial interest in or signature authority or other authority over any financial account in a foreign country if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.June 30, 2009, is the filing deadline (i.e., the date by which Treasury must receive the current year FBAR).

New VDP FAQs

New VDP FAQ no. 43 gives taxpayers who timely reported all 2008 taxable income with respect to a foreign financial account and only recently learned about their 2008 FBAR filing obligation until Sept. 23, 2009, to file their 2008 FBAR according to the instructions and attach a reasonable cause statement explaining why the report is filed late.

These taxpayers also must, by Sept. 23, 2009, send a copy of the delinquent FBAR, together with a copy of the 2008 tax return (if the income tax return’s due date is or was prior to Sept. 23, 2009), to the Philadelphia Offshore Identification Unit at the address in VDP FAQ no. 9. It appears that if (1) the FBAR is filed by Sept. 23, 2009, and (2) the income tax return is on extension and that extended due date is Oct. 15, 2009, and (3) the FBAR is filed between June 30, 2009, and Sept. 23, 2009, a duplicate copy of the income tax return does not have to accompany the FBAR. The IRS will not impose a penalty for the failure to file the FBARs for these situations.

Alternatively, IRS personnel have indicated to the AICPA FBAR Task Force that a U.S. person who finds it difficult to obtain all details about a foreign financial account by June 30, 2009, should file the FBAR by that date with the best available information and file an amended FBAR when more complete information is available. (The form contains a box on page 1 to indicate an amended filing.)

New VDP FAQ no. 42 provides guidance that all delinquent information returns should be filed with the appropriate service center for other nonfiled information returns, such as Form 5471 for CFCs or Form 3520 for foreign trusts, if all the income was reported and all taxes were paid on all taxable income with respect to all transactions related to the CFCs or foreign trusts. The IRS will not impose a penalty for the failure to file the information returns.

Delinquent information returns should be filed with the service centers according to the form instructions and a reasonable cause statement attached explaining why the information returns are filed late. (Form 5471 should be submitted with an amended return showing no change to income or tax liability.) In addition, copies of the delinquent information returns, together with copies of tax returns for all relevant years, should be sent by Sept. 23, 2009, to the Philadelphia Offshore Identification Unit at:

Internal Revenue Service

11501 Roosevelt Blvd.

South Bldg., Room 2002

Philadelphia, PA 19154

Attn: Charlie Judge, Offshore Unit, DP S-611

FBAR resources are available on the AICPA Tax Section Web site and at the JofA‘s “FBAR Resources” page.

—Eileen Reichenberg Sherr, CPA, M. Tax., is a senior technical manager with the AICPA in Washington. Her e-mail address is esherr@aicpa.org.