Recently a gentleman asked a simple question,” Do I need to file FBAR ?”.
And we asked him a few other questions:
- Do you live in the United States (Citizen, Green Card Holder, H1 or any other kind of visa)?
- Do you have a kind of foreign account?
- At any given time, did you have more than $10K in your foreign account?
If the answer is YES to these questions then you must file FBAR. But this was very hard for the client to understand and he gave us many reasons why he should not be required to file FBAR. Let me share those reasons with you.
- I am not a US Citizen or Green Card Holder. I am on H1B Visa.
- The United States does not have any right to know my investment in a foreign country.
- I declared the money when I sent it to India via Bank and therefore the US already knows about this.
- IRS is confused about the FBAR and has no clue about the requirements.
- I didn’t make any kind of money in a foreign country.
Some of you may or may not agree with these reasons but all of you will love this reason.
“I read online that I don’t need to file FBAR.” This statement made me curious to find some information about FBAR online to see what others are saying and here is what I found:
Comments Posted on immigrationvoice.com
I think 2011 FBAR is only for the previous calendar year (2010). I doubt that IRS would go back to 2008 and check. Also you have hardly accumulated any interest for that $25K. But if you still want to be 100% compliant do it. Its just paperwork and hassle.
I know another friend who has a similar situation where he deposited some funds in 2009 to pay off a loan but it sat in his account for just a week or so before it was removed. There is no intention of gaining interest…only signature authority and such cases are exempt. $25 K for a week or so won’t gain more than Rs 500 (maybe less) or so interest. If IRS wants they can have his $10 in interest.
My CPA told me that having amounts like $25K or so previous to the current calendar year is irrelevant and just additional paperwork. The IRS is looking for people who have huge amounts of money sitting and accumulating interest. They are not going to chase and trouble individuals who have no intent to do money laundering or not gaining any significant interest.
This is an imaginative post by some users. I am sure his CPA won’t stand behind this statement and will never give this statement on paper. FBAR may sound like a complex legal requirement but basics are fairly simple. If you are a US person (regardless of your visa status), you have a foreign account with a balance of $10K or more at any given time during last year than you need to file FBAR. If your CPA or financial advisor is telling you otherwise then you should get it in writing or email. Even if you have this kind of advice in writing it may not protect you from penalties but it may help in avoiding the criminal penalties.
I found another post that says that IRS had suspended FBAR during the year 2010. You can read it online at trackitt.com
The Internal Revenue Service has temporarily suspended the requirement to file a Report of Foreign Bank and Financial Accounts for the 2009 and earlier calendar years, for people who are not U.S. citizens, residents or domestic entities.
Announcement 2010-16 temporarily suspends the requirement to file Form TD F 90-22.1, also known as the FBAR, as the IRS tries to clear up the definition of “United States person.” In addition, the IRS issued Notice 2010-23, which provides FBAR filing relief for some persons with signature authority and who own commingled funds.
In October 2008, the IRS published a revised FBAR form, together with accompanying instructions, changing the definition of “United States person.” The IRS received numerous questions and comments from the public concerning the changed definition. In response, and to reduce the burden on the public, the IRS issued Announcement 2009-51, 2009-25 I.R.B. 1105, which directed people to refer to the definition of “United States person” in the July 2000 version of the FBAR instructions to determine if they had a filing obligation.
Once again, this is an online post. Do not rely on such communications unless you have personally written to IRS and got similar advice in the mail by the IRS. Even if you receive such communication in the mail by IRS, you will still be required to file FBAR but you may not have to penalty for that specific period of time.
FBAR law is much simpler than most people think. The issue is that many US persons with accounts in foreign countries have not filed FBAR for years and now they are willing to file the FBAR but do not want to file because penalties for previous years are huge. There is an amnesty program that can help in cleaning up the mess but you are still required to pay some penalties.
We strongly recommend our readers “NOT TO DEPEND” upon online blogs and other media. Please speak with your CPA or get written advice from the IRS. Our bias allows us to find blog posts in our favor but we may ignore the official blogs of the CPA and IRS website for real advice. Don’t be a victim of misinformation. This won’t protect you from penalties.
Want more on FBAR? Stay tuned for a TV interview with Sanjiv Gupta on FBAR?