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Report of Foreign Bank and Financial Accounts

2009 August 22

With all the recent news about secret Swiss bank accounts (see for example this IRS posting about the IRS/UBS agreement, this NY Times article, and this Wall Street Journal article), it is worth noting an easy-to-overlook section of on your tax return.

Schedule B questions about ownership or control of foreign accounts

Form 1040, Schedule B - Questions about ownership or control of foreign accounts

According to the IRS:

If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund, unit trust, or other types of financial accounts, then you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if

  • The person has a financial interest in, or signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year.

A United States person is not prohibited from owning foreign accounts. The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions. The FBAR is a tool to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad.

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