The reporting of Foreign Bank and Financial Accounts—the FBAR reporting on Form TD F 90-22.1—is impacting more individuals than in the past. More people have foreign financial accounts, and online gambling accounts are now considered foreign financial accounts. As Joe Kristan pointed out yesterday, the IRS has granted an extension to individuals who need to file this form.
That said, it’s not that simple to take advantage of this extension. You will have needed to have already filed and paid your 2008 taxes. You must attach an explanation to the TD F 90-22.1 that you file with the Detroit computing center. The IRS notes:
Taxpayers who reported and paid tax on all their 2008 taxable income but only recently learned of their FBAR filing obligation and have insufficient time to gather the necessary information to complete the FBAR, should file the delinquent FBAR report according to the instructions and attach a statement explaining why the report is filed late.
Send a copy of the delinquent FBAR, together with a copy of the 2008 tax return, by September 23, 2009, to the Philadelphia Offshore Identification Unit, at the following address:
Internal Revenue Service
11501 Roosevelt Blvd.
South Bldg., Room 2002
Philadelphia, PA 19154
Attn: Charlie Judge, Offshore Unit, DP S-611In this situation, the IRS will not impose a penalty for the failure to file the FBAR.
Additionally, if all 2008 taxable income with respect to a foreign financial account is timely reported and a United States person only recently learned they have a 2008 FBAR obligation and there is insufficient time to gather the necessary information to complete the FBAR, the United States person may follow the procedures set forth above and no penalty will be imposed.
For 2008 tax returns due after September 23, 2009, the tax return does not need to accompany the 2008 FBAR.
Why September 23rd? That’s the deadline for the current IRS “amnesty” on foreign financial accounts. In previous years just submitting the FBAR late and attaching an explanation sufficed. This year, the IRS is getting tougher on delinquent FBAR filers.
There’s a warning that’s definitely implied in the IRS notice. If you don’t file a FBAR by September 23rd and you should have, it’s possible the IRS won’t be willing to waive the penalties. The penalties are severe. For willful failure to file, the penalty is the greater of $100,000 or half the balance in the account.
If you can, file the FBAR today. If you can’t, file it when you can (but on or before September 23rd) and remember to follow the procedure detailed above. And do spend the $5.10 on mailing it using certified mail, return receipt requested.
