This is a reminder to readers that November 1, 2011 is the deadline for persons whose relationship to foreign accounts is as signatory only (i.e., those persons who have no ownership or title interest in any foreign accounts but serve as signatory only) to file FBARs for pre-2010 years. See Notice 2011-54, 2011-29 IRB 53, here. Those who qualify for this extended deadline should act timely.
The problem for such signatories, of course, is that U.S. owners (title or beneficial) may have their own FBAR filing requirements and, unless the owners filed (or will file) pursuant to a voluntary disclosure (OVDI or regular (quiet or noisy)), the signatory FBARs will not match to owner FBARs. For those U.S. taxpayer owners who decided to go forward without correcting the past, their signatories (usually family members or friends) are in a precarious position if they choose not to file the signatory FBARs within this extended deadline. If they file, their FBARs could be the last link in the chain in identifying the U.S. taxpayer owners who have not gotten right with the IRS and, if they don't file, they are at risk of significant penalties themselves without any mitigation of the owners penalties. This choice is not a good one for family or friends. Owners of the accounts should consider now getting right with the IRS (however they do so, whether by guiet or noisy disclosure) so as to mitigate the damage that could be done to the signatories.
Wednesday, October 12, 2011
8 comments:
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Can someone explain what foreign signatory authority is for a savings account held in another county?
ReplyDeleteHypothetical: “A” lives in USA and is a joint account holder with “B,” an elderly parent, who wanted “A” on an account in another country after “B's” wife (“A’s” mother) died. “A” did not open the account, does not have “B’s” permission to access the account or use funds, “A” never accessed the account or used funds from the account, and the sole reason to put “A” on the account is to facilitate distribution of “B’s” estate when “B” dies. Thanks.
Anon @October 19, 2011 8:38 PM
ReplyDeleteIf you can write checks on an account, you have signatory authority irrespective of whether you use it or not. The family conditions you cite are irrelevant.
This is similar to my case. Some people tell me I have signtory authority over the account and other people tell me no. I am confused. all taxes on the money going in and coming out of the acount was paid in the home country. Is there undisclsoed income? I never used account. I never opened account. I never used money. Why should I pay for trying to help my old parents. This is not fair.
ReplyDeleteIf you can write checks on account, you have signatory authority. There should not be any doubt about this, surely you know if you can write checks on the account ? If the account was not owned by you, and the income was reported on parents' returns in home country, you have good evidence that there is no income due.
ReplyDeleteWith respect to the comments above, I'd like to point out that (1) the FBAR requirement is not a tax issue. Whether the parents in a foreign country paid taxes on the account is not the issue. The FBAR is a reporting document, not a tax return, and requires reporting by people with signature authority or other control over a foreign account, taxes aside. (2) Ability to sign checks on the account is an example of signature authority, but not the only indicator of control. If you can direct someone else as to disposition of that account, then irrespective as to whether or not you signed checks, you have control over the account and you must file the FBAR.
ReplyDeleteI'd also like to address Jack's very valid point as to linkages between people and accounts, and one person's filing of an FBAR may very well expose a co-signatory or co-owner of the same account.
ReplyDeleteWe faced similar issues within the OVDP and OVDI. We had a number of families where, for example, siblings named each other on foreign accounts for matters of convenience. In a few cases, Sibling 1 wanted to come forward and voluntarily disclose; however, Sibling 2 was not as willing to come forward. If Sibling 1 came forward, then Sibling 1's voluntary disclosure would be required to include all persons associated with the account, including Sibling 2. In other words, Sibling 1 would have given the IRS a roadmap to Sibling 2. In the end, it was often a both-or-neither decision.
Yes, parents paid taxes on all income in foreign account to foreign country. From what I know, there were no checks. Also, the interest in the account was so very low that it falls well below the reporting amount for tax purposes in both countries ($10 limit in USA?). Parents always paid tax on any income in foreign country, but what to do if there was no reporting requirment?
ReplyDeleteWhat about these facts under OVDI FAQs # 38 and # 39?
ReplyDelete