Reporting Requirements for Owners of Foreign Bank and Financial Accounts

Over the past few months, we have received several questions from clients regarding whether they should file one or more late Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) with the IRS, and how they should to do so to reduce the likelihood of a late filing penalty being imposed. 

• 1) the person has a financial interest in, or has signatory authority over, a financial account or accounts in a foreign country; and
• 2) the aggregate value of such financial accounts, at any time during the calendar year, exceeded $10,000. 

This form is not a tax return and is not filed with a taxpayer’s federal income tax return, but rather must be filed separately with the Department of the Treasury on June 30 of each year following the close of the taxpayer’s year. (See the following checklist.) No filing extension of the form is allowed.

Penalties

There are numerous potential criminal and civil penalties associated with the late filing of From TD F and making material or willful misstatements on it. Of primary relevance to most taxpayers is that, beginning on Oct. 22, 2004, nonwillful violations may be subject to a penalty of up to $10,000, unless the violation was due to reasonable cause.

Little was known concerning whether the IRS, responsible for enforcing the filing of Form TD F, wanted to encourage delinquent Form TD F’s to be filed until the IRS issued News Release IR 2008-79 on June 17, 2008. In that IR, the IRS summarized the relevant filing requirements and potential penalties associated with the late or incomplete filing of Form TD F. It also indicated that:

• 1) if the form was delinquent for prior years, it should be filed; and
• 2) if the late filing was due to reasonable cause, a late-filing penalty would not be assessed.