Reporting of foreign bank account for US citizens

02/26/2012

Reporting of foreign bank account for US citizens
Each United States person is required to disclose any financial interest in foreign bank accounts on Form TD F 90-22.1, commonly referred to as FBAR, if the aggregate value of all accounts exceeds $10,000 at any time during the calendar year. Disclosure is mandatory with possible criminal and civil penalties for failure to report or filing a false report.
The interest must be reported on Schedule B, of the current year and under the newest Offshore Voluntary Disclosure Program (OVDP), announced in IR 2012-5, all prior returns are to be amended to report the interest earned on foreign accounts, the tax due and any interest on the amount due for the last eight (8) years. Penalties can be as high as 27.5% of the highest balance during the eight-year period. However, it could be as low as 5% for eligible taxpayers.
According to the IRS website, tax practitioners must exercise due diligence when it comes to determining the accuracy of information obtained either written or orally from our clients including the answers given for questions 7 and 8 on Schedule B, Part III. Practitioners, subject to Circular 230 regulations, must advise the taxpayer of the consequences for noncompliance. If the client refuses to disclose interest earned in a foreign account, the practitioner cannot prepare the return without being in violation of Circular 230.