Individual taxpayers in Sacramento no doubt have April 15 locked in their brains. Those who are self-employed also have June 15, Sep. 15 and Jan. 15 in their permanent memory banks. For those who have foreign or offshore bank accounts that earn interest, there is another date of which they should be aware.
June 30 is the deadline to meet one's tax obligation for offshore assets and file the Report of Foreign Bank and Financial Accounts, or FBAR, to the Internal Revenue Service.
News sources remind us that FBAR was created in 1970 as part of the Banking Secrecy Act. The purpose was to put an end to money laundering and tax evasion. FBAR only applies to accounts worth $10,000 or more. The actual form is TD F 90-22.1
As we posted in an earlier blog, the IRS is stepping up efforts to gain tax compliance for offshore bank accounts and other foreign investments. Compliance with the FBAR is gaining closer scrutiny.
An additional form was required to be filed with the individual tax return on April 17 this year. Form 8938, Statement of Specified Foreign Financial Assets, should have been filed with an individual's or married couple's tax return.
Both the FBAR and the 8938 apply to foreign investments, but they are different. According to reliable sources, the main differences are:
- Form 8393 is for individuals only and is required for accounts worth $50,000 or more.
- FBAR is for businesses or individuals and is required for accounts valued at $10,000 or more.
- Form 8393 is filed with a tax return and was due on April 17.
- FBAR is a separate filing and is due on June 30.
There are other differences between the two forms; however it is a good idea to work with a tax or legal professional when it comes to reporting offshore accounts. An innocent mistake could result in significant penalties and interest.
Source: The Orange County Register, "Tax season not over for those with foreign accounts," Patrick Harper, June 19, 2012