Federal law provides that if any U.S. person during a calendar year has a “financial interest” or “signature authority” or “other authority” in offshore “financial accounts” in the aggregate that exceeds $10,000 must disclose the foreign accounts on a FinCen Form 114 (“FBAR”). A “financial interest” includes any interest in an account titled in the name of a U.S. person, regardless of whether the account is maintained for his or her benefit. If the account is held in joint names or in several different names, each U.S. Person involved is deemed to have a related financial interest. “Signature authority” or “other authority” are also defined in a manner designated to prevent game playing. A person is treated as having signature authority over an account if she can control the disposition of the underlying assets by “comparable power.”
There are serious consequences for foreign account holders who do not report the accounts on an FBAR. Account holders who do not comply with FBAR requirements may be subject to civil, criminal penalties or both. The maximum civil penalty for a willful violation of FBAR reporting and recordkeeping requirements is the greater of $100,000 or 50 percent of the balance in the balance in the account at the time of violation. Criminal violations of the FBAR rules can result in a fine and/or five years in prison.
The tax attorneys at Diosdi Ching & Liu, LLP have substantial experience in advising foreign bank account holders regarding FBAR filings.