On March 10, 2016, the Financial Crimes Enforcement Network of the Department of the Treasury (FinCEN) published proposed regulations on Reports of Foreign Bank and Financial Accounts (FBAR). If adopted, the proposed rules would make significant changes to the current foreign account reporting requirements.
In unwelcome news for many taxpayers, the regulations would require that detailed account information be provided on each foreign account for which an FBAR is required, regardless of how many foreign financial accounts the taxpayer must report. Currently, U.S. persons with a financial interest in or signature authority over 25 or more foreign financial accounts need only provide limited account information for each account. FinCEN explained that the rule change was motivated by an information gap caused by the relaxed reporting rule:
the provisions limiting information reported with respect to situations where a filer has 25 or more foreign financial accounts has created a significant gap in FinCEN’s and law enforcement’s ability to analyze a comprehensive set of data on all otherwise reportable foreign financial accounts.
For 2013 alone, the current exemption involved approximately 10,800 filers reporting 5.4 million foreign accounts, which represented 56 percent of all accounts reported for that year. If adopted, these accounts would be subject to the more detailed FBAR reporting.
In a more pro-taxpayer move, the proposed regulations attempt to address the reporting burden involving many “overlapping signature authority” situations. In that regard, FinCEN proposed to exempt from FBAR reporting officers, employees and agents of U.S. entities with signature authority over an account owned by the entity, when signature authority is due solely to their employment and the account is already required to be reported by the employer or any other U.S. entity within the same corporate or other business structure as the U.S. employer. Currently, officers and employees of federally regulated entities are exempt from FBAR reporting for their signature authority over the entities’ foreign financial accounts if the officer or employee has no financial interest in the foreign account.
The proposed regulations also set forth the new FBAR filing due date of April 15 (with an extended due date of October 15 available upon request) effective for reports due in 2017 for the 2016 reporting year.
Click here to read the proposed regulations in their entirety.
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