JUST WHEN YOU THOUGHT YOU WERE FINISHED WITH TAX FOR ANOTHER YEAR!
This is just an FYI, the author is Mary-Heather Styles, she can be contacted at mhstyles@transatlantictax.com or (602) 955-5007. From The Union Jack Newspaper. Just in case anyone has an account in the UK.
Strictly speaking, this is not a tax requirement. But ignore it at your peril because the penalties (both civil and criminal) mean this is one obligation you do not wish to forget. There are no extensions for this form, so even if your are taking time out until October, this one needs to be looked at - now!
If you have had the equivalent of $10,000 in bank or investment accounts outside the US at any tine during a year you must file information returns with the US Treasury by the following June 30. Your total is reached by adding together the various account balances. The equivalent value in pounds for 2010 is just under 6,250GBP. the form concerned is the aptly-named "Report on Foreign Bank and Financial Accounts" otherwise known as the FBAR (it only makes sense if you reverse the title) or TD F90-22.1 (for even less obvious reasons until you look at the top left corner of the form).
Revised forms were introduced two years ago and more information is now required about each account. The name and address of the bank, building society or investment company are predictable requirements, but you must also include your account number and the value in dollars of the highest balance in the account during the year. No matter when during the year the highest balance occurred, the exchange rate for the transfer into dollars for the form is that on December 31. For 2010, this was GBP = $1.6042.
These forms cannot be jointly files - each person must complete and sign their own form. They must also be prepared for US entities, such as corporations, partnerships, trusts and estates. Accounts are split between those owned personally, shared accounts and those over which you have signatory authority but no ownership. For shared accounts, details about your co-owner(s) must be included - this can be unnerving for non-US resident co-owners who do not appreciate their details being shred with the US government. The third category can also cause concern - sometimes being a signatory does not make you privy to all the details about an account, but you will need them to complete the form. And remember to include any foreign accounts held for minor children or as a joint-owner with an overseas parent.
When determining the highest value of investment accounts, practicality takes precedence over the strict position - if you receive valuations on April 5, June 30, and December 31, use the highest one!
If you have decided that this is unworkable and you would prefer to ignore it, let's move on to the really bad part of all this - the penalties! For failure to file, the civil penalty can be up to $10,000, unless you have reasonable cause. But if you have not declared income form the account on your tax return, "reasonable cause" will be difficult to establish. Willful failure to report an account can result in a penalty of higher of $100,000 or 50% of the balance in the account at the time of the violation. In addition to these civil penalties, wilful failure to report can result in
