Tax Alert

Guidance Issued for FBAR and Offshore Disclosures

(March 8, 2011)

Final Guidance Issued for FBAR Form TDF 90-22.1
The U.S. Treasury issued final guidance on Feb. 23, 2011, on requirements for filing form TDF 90-22.1, “Report of Foreign Bank and Financial Accounts” (FBAR). U.S. persons with a financial interest in or signature or other authority over foreign financial accounts (FFAs) are required to file. The final rules largely adopt the proposed regulations issued Feb. 26, 2010, and take effect March 28, 2011.

Among other things, the final rules:

  • Clarify the definition of reportable accounts subject to FBAR filing requirements. The final rules exclude customers of U.S. institutions with foreign assets and customers of U.S. global custodians, with certain exceptions;
  • Revise the definition of “signature or other authority” to refer to authority where an individual (or individuals) can control the disposition of assets through direct communication with the foreign financial institution; and
  • Clarify that individuals with signature authority over their companies’ FFAs are not personally required to maintain the records of accounts held by their employers.

These rules apply to taxpayers required to file Form TDF 90-22.1 by June 30, 2011, as well as for filings required in future years. In addition, taxpayers who properly deferred filing Form TDF 90-22.1 for FFAs maintained in calendar years prior to 2010 may rely on the provisions of the new rules for such filings due on June 30, 2011.

For more information on the final regulations, please contact Mike Granberg at 630.586.5163 or, John Kelleher at 630.586.5274 or, or any Crowe Horwath LLP tax professional.

Guidance on 2011 Offshore Voluntary Disclosure Initiative
The Internal Revenue Service (IRS) announced on Feb. 8, 2011, the launch of the 2011 Offshore Voluntary Disclosure Initiative (OVDI). The initiative is similar to the 2009 OVDI as it allows taxpayers who had been delinquent in disclosing foreign assets and reporting foreign income to bring their required disclosures and filings up to date on or before Aug. 31, 2011. In certain cases, however, penalties under the current OVDI will be greater than under the 2009 program.

Taxpayers who choose to participate in the 2011 OVDI potentially can:

  • Decrease the risk of criminal prosecution and civil penalties;
  • Calculate (within a reasonable degree) the total cost of resolving all offshore tax issues relating to U.S. disclosure and compliance;
  • Minimize costs of future IRS audits and legal investigations and assessments; and
  • Opt to pay tax-related penalties at a lower rate.

Taxpayers who choose not to participate in the OVDI and are subsequently examined or investigated by the IRS potentially could – depending on the circumstances – face significant penalties, including failure to file, failure to pay, or accuracy-related penalties, as well as criminal charges.

To participate in the OVDI, taxpayers must go through a prescribed process that includes filing copies of original and amended returns, including offshore-related information returns (Forms TDF 90-22.1, 5471, 5472, 8865, 926) for the years under disclosure, and paying applicable penalties, taxes, and interest.

For more information about the new OVDI, please contact Mike Granberg at 630.586.5163 or, John Kelleher at 630.586.5274 or, or any Crowe Horwath LLP tax professional.

Under U.S. Treasury rules issued in 2005, we must inform you that any advice in this communication to you was not intended or written to be used, and cannot be used, to avoid any government penalties that may be imposed on a taxpayer.

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Mike W. Granberg