Deadline Approaches to File Annual Information Report on Foreign Financial Accounts
Every U.S. person with a financial interest in, or signature or other authority over, any financial account outside the U.S. must file an annual report on Treasury Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts) if the aggregate value of all such accounts exceeds 10,000 USD at any time during the calendar year. Form TD F 90-22.1 must be filed on or before June 30th each year.
This filing requirement generally applies to U.S. citizens and tax residents, and to domestic corporations, partnerships, trusts and estates. A financial account for this purpose includes a bank account, securities account, securities derivative account, an account in which assets are held in a commingled fund, and other financial accounts or accounts maintained with any financial institution.
A U.S. person has a financial interest in every account for which such person is the owner of record or has legal title, whether the account is for such person’s benefit or for the benefit of another.
“Signature or other authority over” a financial account generally includes the ability to control the distribution or disbursement of money or other property in or from the account, whether by delivery of a document containing a signature (or in conjunction with one or more other persons signing the document) or otherwise by direct communication with or to the financial institution with which the account is maintained.
Individuals with authority to make investment decisions but not disbursements from the account are not required to file the form. In addition, the form need not be filed for financial accounts based in the U.S., even if the accountholder is a foreign fund and even if the account is opened at a U.S. branch of a foreign financial institution. For example, the U.S. manager or director of a foreign fund with a financial account at the New York branch of Credit Suisse does not have to file this form. Conversely, the U.S. manager or director of a U.S. fund with a financial account at the London branch of Citibank would be required to file the form.
Form TD F 90-22.1 is a relatively short form. It requires the filer to provide personal identification information and the number of foreign accounts. With respect to each foreign account, the form also requires the account number and institution at which it is held, identification of the kind of account (i.e. bank, securities, other), the range of value in the account, and the country in which the account is located.
Although this filing requirement is not new, renewed focus has been placed on it in recent years due to an increase in the penalties for noncompliance and the Treasury’s increased enforcement of these rules. A violation does not need to be willful in order for penalties to be imposed. Civil penalties for a non-willful failure to timely file Form TD F 90-22.1 range up to 10,000 USD per violation. Civil penalties for a willful violation range up to the greater of 100,000 USD or 50 percent of the amount in the foreign account at the time of the violation Criminal penalties and imprisonment may also apply for failure to file or supply information, and for filing false or fraudulent reports. Civil and criminal penalties may be imposed together.
Form TD F 90-22.1 must be filed with the U.S. Department of Treasury, P.O. Box 32621, Detroit, MI, 48232-0621. The address for commercial delivery is: U.S. Department of Treasury, Currency Transaction Reporting, 985 Michigan Avenue, Detroit, MI, 48226. The form may be found at: http://www.irs.gov/pub/irs-pdf/f90221.pdf.
Companies, advisors and managers with questions about this filing requirement should contact Rick Schaul-Yoder or Sharon C. Lincoln of Foley Hoag’s Tax Department at 617 832 1000.
Note
These filing requirements and the potentially significant civil and criminal penalties for failure to comply apply to, among others:
▪ U.S. hedge fund managers with authority over foreign financial accounts.
▪ U.S. directors of offshore funds, if such directors have signature or other authority over such funds’ foreign financial accounts.
▪ U.S. hedge funds with controlling interests in offshore funds with foreign financial accounts.