Foreign Accounts and Assets Reporting

Generally, a U.S. citizen is required to report his worldwide income on his federal income tax return—that is, all income, regardless of which country is the source of the income. (Reg. § 1.1-1(b))

Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing TD F 90-22.1, Report of Foreign Bank and Foreign Accounts (FBAR) with the Department of the Treasury on or before June 30 of the succeeding year.

The civil and criminal penalties for non-compliance with the FBAR filing requirements are significant. Civil penalties for a non-willful violation can range up to $10,000 per violation, and civil penalties for a willful violation can range up to the greater of $100,000 or 50% of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine, or 10 years imprisonment, or both. Civil and criminal penalties may be imposed together. The authority to enforce these assessments has been delegated to the IRS.