During tax time we always ask our clients if they have financial accounts in a foreign country. We do this for a very good reason. There are strict reporting requirements if you have assets in a foreign account.
More specifically, you must file a Form TD F 90-22.1 with the Department of Treasury if:
- You are a US citizen or resident,
- You have a financial interest or signature authority of financial accounts in a foreign country,
- The aggregate value exceeds $10,000 at any time during the calendar year.
Foreign accounts include bank accounts, mutual funds, annuities, securities, and derivatives. The only exceptions are retirement accounts, military banking facilities, and publically traded entities.
If you have legal title to the account, you are required to file, even if it is for the benefit of non-US persons or a business entity such as a corporation, partnership, or trust.
The Form TD F 90-22.1 must be filed by June 30 of the following year. You can now file the form electronically by going to http://bsaefiling.fincen.treas.gov/Enroll_Individual.html. Joint account owners may both have to file a form.
The civil penalties for not filing range from $500 to $100,000, and criminal penalties can be as high as $500,000 and 10 years in jail. Fortunately, the Treasury has been very lenient, and is not enforcing penalties on filers who were not aware of this requirement. But they expect you to catch up on all missed filings.
Also, starting January 1, 2011, US taxpayers holding foreign financial assets outside the United States with an aggregate value exceeding $50,000 must report these assets on Form 8938 attached to their income tax returns.
Be sure to give your CPA a call if you have questions about these forms, or if you are unsure of your filing requirement.