Taxable Talk

Bloomberg is reporting that the IRS will delay the September 23rd extended deadline for filing the Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1, or FBAR) until October 15th. The extension (of an extension) was requested by numerous accountants and attorneys who are dealing with large numbers of requests to file under the IRS’ voluntary amnesty program.

Do note that this is, for now, just a report of, “[A] government official familiar with the program,” and is not a confirmed IRS announcement. I would expect confirmation (or a denial) tomorrow.

Update: The IRS confirmed this morning the extension until October 15th. The IRS also stated that there will be no further extensions.

FBAR. Just four letters, but put together it’s become a very interesting tax story this summer. Well, that story will play out as summer turns to fall next week.

The IRS’ limited amnesty on criminal prosecutions of late filers of Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1, aka FBAR) ends on Wednesday, September 23rd. If you have not reported income from foreign financial accounts—say you had $2 million squirreled away in a bank account in Lichtenstein—you need to see an attorney now.

But there’s a second part to this story. If you have a foreign financial account and haven’t filed your 2008 Form TD F 90-22.1, you have until Wednesday to do so. Lots of people have these accounts and don’t realize it. You have a credit card issued by the Bank of London (U.K.); you have a foreign financial account. Most online gambling accounts are foreign financial accounts.

To determine whether or not you must report these accounts, take your maximum balance of each such account at any time during 2008, sum the totals, and compare the sum to $10,000. If the sum is equal to or exceeds $10,000 you must report all of your accounts, even the accounts that have just $5 in them. If you’re just now filing the TD F 90-22.1 you must also send a copy of your 2008 tax return to an IRS office in Philadelphia. I detailed the procedure here.

Several years ago I wrote that filing an FBAR almost always leads to an audit. That may have been true years ago but is almost certainly not the case today. In 2006, the Department of the Treasury received over 500,000 Form TD F 90-22.1’s. The IRS just doesn’t have the staff to audit everyone who files the form. While it’s likely that filing the FBAR does increase your risk of audit it’s probable it’s no longer a huge risk factor. However, not filing an FBAR when you’re supposed to means you are absolutely taking a giant risk. If it’s an unwillful violation you’re looking at a maximum $10,000 fine; it it’s a willful violation, you’re looking at a minimum $100,000 fine plus a possible visit to ClubFed.

No one knows if the IRS will, after September 23rd, routinely fine those individuals who submit late FBAR filings. But that wouldn’t surprise anyone in the tax professional community. So if you’re impacted by this follow the procedure and file the FBAR now or you may have some very unpleasant consequences in the future.

Tuesday, September 15th is a big tax deadline.

• 3rd quarter estimated payments for individuals are due;
• 3rd quarter estimated payments for corporations are due;
• Calendar year corporate returns on extension are due (both C Corporations and S Corporations);
• Partnership and LLC returns on extension are due; and
• Trust/Fiduciary returns on extension are due.

For estimated payments you need to either have paid electronically (using EFTPS and/or your state’s electronic payment system, if available) or postmarked by the 15th. There are a few states which give a few extra days for estimated payments. For example, Hawaii gives you until the 20th.

For corporate, partnership, and LLC returns, you need to either have your returns electronically filed or postmarked by the 15th.

Trust and fiduciary returns need to be postmarked by the 15th.

Finally, if you use the US mail spend the extra $5.10 on certified mail, return receipt requested. It’s the only method you have of proving you timely filed your return.