Foreign Bank Account Reports (FBAR) on Form TDF 90-22.1 are due in Detroit, Michigan on June 30th. Some CPAs and tax attorneys seem to be relying on an exception contained in IRS Notice 2010-23 which provides that persons who have signature authority, but no financial interest in a foreign bank account do not need to file an FBAR until June 30, 2011. The expectation is that the IRS may publish rules which would permanently exempt such persons from filing an FBAR. That’s fine, but some CPAs and even some tax lawyers believe that persons who are holding money for a foreign resident are allowed to use this exception to avoid filing an FBAR.
So for example, John opens an account in Israel for his father, Sam, who lives in Iraq. John is a U.S. citizen. Sam has never even been to the U.S. for a visit. The funds in the offshore account belong to Sam, but because the Israeli bank wouldn’t open up an account in Sam’s name unless he comes to Israel, John opens it in his own name, and puts Sam’s funds in the offshore bank account.
The assumption that John falls under IRS Notice 2010-23 is incorrect. John has a financial interest in the account. The definition of financial interest is set forth in the instructions to the FBAR, Form TDF 90-22.1 which states:
A United States person has a financial interest in each account
for which such person is the owner of record or has legal title,
whether the account is maintained for his or her own benefit or
for the benefit of others including non–United States persons. It’s
clear that John must file an FBAR on June 30, 2010 since he
holds legal title.