Under the Bank Secrecy Act, U.S. residents or a person in and doing business in the United States must file a report with the U.S. Treasury if he or she has a financial account in a foreign country with a value exceeding $10,000 at any time during the calendar year. Taxpayers comply with this law by noting the account on their tax return and by filing Form 90-22.1, the Foreign Bank and Financial Account Report (FBAR). Willfully failing to file an FBAR report can be punished under both civil and criminal law.
Tax season is upon us, and Arnstein & Lehr’s Chicago partner Robert McKenzie helps shed some light on new rules for offshore foreign account filing. The Foreign Account Tax Compliance Act’s (FATCA) was passed in 2010 after Congress discovered the large number of Americans hiding their money in offshore accounts. The law states that every year, all foreign banks, worldwide, must send an information document on all Americans to the IRS. If a bank does not comply, the IRS can require American banks to withhold 30% of transactions between them. Listen to Bob McKenzie’s audio commentary here.