by Tom Andrews, CPA
Foreign bank account compliance is making headlines again. For those yacht crewmembers who are still not familiar with FBAR requirements (Foreign Bank Account Reporting) the Treasury department requires that a United States Citizen or Tax Resident is required to file form TD F 90-22.1 if:
- The United States person had a financial interest in or signature authority over at least one financial account located outside the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
There are both civil and criminal penalties for failure to file the form 90-22.1 commonly referred to as FBAR. The willful failure to file penalties may reach $100,000 or 50% of the value of the offshore account whichever is greater.
While I have written columns in the past addressing this issue the topic is appearing on the radar again after the IRS recently increased its pursuit of civil penalties for taxpayers who fail to file the appropriate international tax disclosure forms. The Fourth Circuit Court of Appeals and the District Court of Utah recently upheld civil penalties for willful failure to file FBAR’s on two separate prosecutions. In both cases the courts made note that the defendants had signed their form 1040s under “penalties of perjury” and incorrectly answered “no” to Question 7(a) of their Schedule B. Basically the court was arguing that the omission of the disclosure was essentially lying to the federal government about the existence of the foreign bank accounts.
While these cases involved large bank accounts and a material amount of undisclosed income earned on these foreign bank accounts it is another reminder that the federal government is continuing to aggressively enforce tax laws and regulations that affect the international arena. While most yacht crewmembers are not hiding millions of dollars offshore the mere existence of a foreign bank account should prompt the crewmember to notify their accountant so the proper forms may be filed. Also if the yacht crewmember is simply a signor on the yachts foreign operating account there may be disclosure requirements as well.
As demonstrated in both of these cases once you sign your tax return you can be held responsible for missing or materially incorrect information on that return. It is important that you always review your tax return and ask questions if something doesn’t look or smell right, if something does not jive review it with your accountant and make sure you are providing all the information necessary to prepare an accurate tax return, ultimately the taxpayer is responsible for the accuracy of the final return.