Saturday, March 6, 2010

Further Relief by Deferral for Signatories and Certain Owners of Commingled Funds

On February 26, 2010, by IRS Notice 2010-23, the IRS announced further relief by deferral for U.S. persons who are signatories only of foreign accounts or have interests in certain commingled accounts. The full Notice is here, but the the key provisions are fairly short, so I just cut and paste them here:

1. Signature Authority.

Persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. The deadline of June 30, 2011, applies to FBARs reporting foreign financial accounts over which the person has signature authority, but no financial interest, for the 2010 and prior calendar years. When completing an FBAR that is subject to the extension provided in this paragraph, persons must adhere to FBAR guidance in effect at the time the FBAR is filed.

2. Certain Foreign Commingled Funds.

Persons with a financial interest in, or signature authority over, a foreign commingled fund that is a mutual fund are required to file an FBAR unless another filing exception, as provided in the FBAR instructions or other relevant guidance, applies. The IRS will not interpret the term "commingled fund" as applying to funds other than mutual funds with respect to FBARs for calendar year 2009 and prior years. Thus, the IRS has determined that it will not apply its enforcement authority adversely in the case of persons with a financial interest in, or signature authority over, any other foreign commingled fund with respect to that account for calendar year 2009 and earlier calendar years. A financial interest in, or signature authority over, a foreign hedge fund or private equity fund is included in the administrative relief provided in the preceding sentence.

3. FBAR-Related Questions on Federal Tax Forms.

Provided the taxpayer has no other reportable foreign financial accounts for the year in question, a taxpayer who qualifies for the filing relief provided in this Notice should check the "no" box in response to FBAR-related questions found on federal tax forms for 2009 and earlier years that ask about the existence of a financial interest in, or signature authority over, a foreign financial account.
Items 1 and 3 are particularly helpful to the many family members who frequently appeared as signatories but with no ownership / financial interest in the particular account or in any other offshore financial account.   I think the message here is that the FBAR form will likely change by the extended due date, so that those persons who elect to defer filing will have to use the then current form.  These signatories can file now, since the extension is just for the final date to file.  If so, they use the current form

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