Reminder: 2013 FBAR Filing Due by June 30, 2014

U.S. persons having a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account may be required by the Bank Secrecy Act to report their interest in the account to the IRS by electronically filing by June 30, 2014, a Financial Crimes Enforcement Network Form 114, "Report of Foreign Bank and Financial Accounts" (FBAR). This form replaces TD F 90-22.1, the previously used FBAR form. A U.S. person may have a reporting obligation even though the foreign financial account does not generate any income.

If a U.S. person had such a financial interest or signature authority at any time during calendar year 2013, the FBAR must be received by the Department of the Treasury on or before June 30, 2014. The FBAR is not filed with the federal income tax return. The granting by the IRS of an extension to file federal income tax returns does not extend the due date for filing an FBAR. The June 30th filing date may not be extended.

U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2013, that they may have a U.S. income tax liability and a filing requirement in 2014. The filing deadline is Monday, June 16, 2014, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get one additional day because the normal June 15 extended due date falls on Sunday this year. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. Nonresident aliens who received income from U.S. sources in 2013 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 16 depending on sources of income. See IR-2014-52 for additional details available on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

FBAR filers report their foreign accounts by (1) completing boxes 7a and 7b on Form 1040 Schedule B; box 3 on the Form 1041 "Other Information" section; box 10 on Form 1065 Schedule B; or boxes 6a and 6b on Form 1120 Schedule N and filing the FBAR, satisfies the account holder's reporting obligation. Even if all relevant information is not available, the FBAR should be filed with as much information as is available; the FBAR can be later amended (by checking the "Amended" box in the upper right corner of the first page of the FBAR) when the additional or new information becomes available. Also, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 (Revised December 2013) if the aggregate value of those assets exceeds certain thresholds. See the instructions for Form 8938 on irs.gov for details.

A United States person having a financial interest in or signature authority over a foreign financial account must file an FBAR if the aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year. A United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies created or organized in the U.S. or under the laws of the U. S.; and trusts or estates formed under the laws of the United States.

The term "person" includes an individual and legal entities including, but not limited to, a limited liability company, corporation, partnership, trust, and estate. A U.S. resident includes an alien residing in the United States. To determine whether the U.S. person is a resident of the U.S., look for guidance in the residency tests set forth in 26 U.S.C. §7701(b).

A single-member LLC, which is a disregarded entity for U.S. tax purposes, is a U.S. person for FBAR filing purposes since the tax rules concerning disregarded entities do not apply with respect to the FBAR reporting requirement (FBARs are required under Title 31, not under any provisions of the Internal Revenue Code).

FINANCIAL ACCOUNT. A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution). A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).

FOREIGN FINANCIAL ACCOUNT. A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account. A "foreign country" includes all geographical areas outside the United States, the commonwealth of Puerto Rico, the commonwealth of the Northern Mariana Islands, and the territories and possessions of the United States (including Guam, American Samoa, and the United States Virgin Islands).

FINANCIAL INTEREST. A U.S. person has a financial interest in a foreign financial account for which:

(1) the U.S. person is the owner of record or holder of legal title, regardless of whether the account is maintained for the benefit of the U.S. person or for the benefit of another person; or

(2) the owner of record or holder of legal title is one of the following: (a) An agent, nominee, attorney, or a person acting in some other capacity on behalf of the U.S. person with respect to the account; (b) A corporation in which the U.S. person owns directly or indirectly: (i) more than 50 percent of the total value of shares of stock or (ii) more than 50 percent of the voting power of all shares of stock; (c) A partnership in which the U.S. person owns directly or indirectly: (i) an interest in more than 50 percent of the partnership's profits (e.g., distributive share of partnership income taking into account any special allocation agreement) or (ii) an interest in more than 50 percent of the partnership capital; (d) A trust of which the U.S. person: (i) is the trust grantor and (ii) has an ownership interest in the trust for U.S. federal tax purposes [See 26 U.S.C. § 671-679 to determine if a grantor has an ownership interest in a trust]; (e) A trust in which the U.S. person has a greater than 50 percent present beneficial interest in the assets or income of the trust for the calendar year, unless the trust, a trustee of the trust, or agent of the trust: (i) is a U. S. person and (ii) files an FBAR disclosing the trust's foreign financial accounts.; or (f) Any other entity in which the U.S. person owns directly or indirectly more than 50 percent of the voting power, total value of equity interest or assets, or interest in profits.

SIGNATURE AUTHORITY. Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account. Other authority exists in a person who can exercise power that is comparable to signature authority over an account by direct communication to the bank or other person with whom the account is maintained, either orally or by some other means.

There are specified exceptions to the "signature authority only" filing requirement for officers or employees of certain types of banks and entities. FinCEN Notice 2013-1 extended the due date for filing FBARs by certain individuals with signature authority over, but no financial interest in, foreign financial accounts of their employer or a closely related entity, to June 30, 2015.

ELECTRONIC FILING OF THE FBAR. On June 29, 2011, the Financial Crimes Enforcement Network (FinCEN) announced that all FinCEN forms must be filed electronically with certain exceptions. However, the FBAR was granted a general exemption from mandatory electronic filing through June 30, 2013. E-filers will receive an acknowledgement of each submission.

On September 30, 2013, FinCEN posted, on their internet site, a notice announcing FinCEN Form 114, Report of Foreign Bank and Financial Accounts (the current FBAR form). FinCEN Form 114 supersedes TD F 90-22.1 (the FBAR form that was used in prior years) and is only available online through the BSA E-Filing System website. The system allows the filer to enter the calendar year reported, including past years, on the online FinCEN Form 114.

The FinCEN system also offers an option to "explain a late filing," or to select "Other" to enter up to 750-characters within a text box where the filer can provide a further explanation of the late filing or indicate whether the filing is made in conjunction with an IRS compliance program.

VERIFICATION OF FBAR FILING. Ninety days after the date of filing, the filer can request verification that the FBAR was received. An FBAR filing verification request may be made by calling 866-270-0733 and selecting option 1. Up to five documents may be verified over the phone. There is no fee for this verification.

Alternatively, an FBAR filing verification request may be made in writing and must include the filer's name, taxpayer identification number and the filing period. There is a $5 fee for verifying five or fewer FBARs and a $1 fee for each additional FBAR. A copy of the filed FBAR can be obtained at a cost of $0.15 per page. Check or money order should be made payable to the United States Treasury. The request and payment should be mailed to: IRS Enterprise Computing Center/Detroit, ATTN: Verification, P.O. Box 32063, Detroit, MI 48232

NO EXTENSION OF TIME TO FILE FBAR. There is no extension of time available for filing an FBAR. Extensions of time to file federal tax returns do NOT extend the time for filing an FBAR. If a delinquent FBAR is filed, attach a statement explaining the reason for the late filing.

FAILURE TO FILE THE FBAR. The failure to timely file the FBAR can be subject to civil penalties and possibly criminal sanctions (i.e., imprisonment). The civil penalties might be $10,000 per year but a willful failure to file could be subject to civil penalties equivalent to the greater of $100,000 or 50% of the balance in an unreported foreign account, per year, for up to six tax years. Penalties might be avoided if there is reasonable cause for the failure to timely file the FBAR.

RECORD KEEPING REQUIREMENTS. Persons required to file an FBAR must retain records that contain the name in which each account is maintained, the number or other designation of the account, the name and address of the foreign financial institution that maintains the account, the type of account, and the maximum account value of each account during the reporting period. The records must be retained for a period of 5 years from June 30th of the year following the calendar year reported and must be available for inspection as provided by law. Retaining a copy of the filed FBAR can help to satisfy the record keeping requirements.

SEPARATE REPORTING REQUIREMENTS BY U.S. TAXPAYERS HOLDING FOREIGN FINANCIAL ASSETS (FORM 8938). Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The Form 8938 filing requirement does not replace or otherwise affect the requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web .