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IRS suspends some FBAR filing requirements

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The IRS has eased the filing requirements for the Report of Foreign Bank and Financial Accounts, commonly known as the “FBAR,” for 2009 and earlier tax years. (IRS Announcement 2010-16 and Notice 2010-23)

Alert: If you’re doing business in the United States, but are not a U.S. citizen or resident, you may be off the hook.    

Here’s the whole story: Generally, any U.S. person or domestic entity—such as a corporation, partnership, trust or estate—is required to file an FBAR if they have financial interests in, or signature or other authority over, any foreign financial account (e.g., a bank or securities) if the account exceeds $10,000. The report must be filed by June 30 of the following year.

In October 2008, the IRS redefined a “U.S. person” to include any citizen or resident of the United States or a person in, or doing business in, the United States. Based on the public response, the IRS has permanently suspended the FBAR filing requirement for persons who are not U.S. citizens, U.S. residents or domestic entities. Also, you may rely on the previous definition of a “U.S. person” in the July 2000 version of the FBAR instructions to determine if you have an FBAR filing obligation for 2009 and earlier years.

Furthermore, in Notice 2010-23, the IRS provides that individuals with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those financial accounts. This revised deadline applies to 2010 and prior calendar years.

A taxpayer who qualifies for the filing relief should check the “no” box in response to FBAR-related questions on federal tax forms for 2009 and earlier years that ask about the existence of a financial interest, or signature authority over, a foreign financial account.

Tip: In a related matter, the Financial Crimes Enforcement Network (FinCen) has proposed new rules clarifying who or what entity must file reports and which accounts must be reported. The proposals generally reflect the FBAR changes.

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