There has been confusion among Cayman Islands residents who have US passports or US green cards about whether they have to report their non-US bank accounts to the Treasury Department each year.
Even if they do not file annual US income tax returns, they may have to complete a so-called Foreign Bank and Financial Account Report and ensure that it is received by the US Treasury Department by this Sunday, 30 June, said William Davis, a tax lawyer with Calvo, Fisher & Jacob LLP in Dallas, Texas.
“The requirement under FBAR reporting rules to report foreign financial accounts has become a major focus of the Internal Revenue Service and the FBAR reporting requirements must be taken very seriously,” Mr. Davis said.
Penalties for failing to file the report can be harsh, ranging from US$500 to US$10,000, depending on the severity of the case. Wilful failure penalties, in connection with tax evasion, are even larger and can be the greater of $100,000 or 50 per cent of the amount in the account at the time of the violation. Each year that is not filed counts as a separate violation.
The annual FBAR filing obligation is separate from the requirement to file US income tax returns.
Cayman residents with a US passport or green card must report any bank and financial account in the Cayman Islands or in any other jurisdiction outside of the US, provided the combined balance of the accounts exceeded US$10,000 at any time in 2012.
The FBAR also covers accounts in which the reporting person has a financial interest and accounts over which the filer has signatory authority. The definition of financial account is very wide and includes bank accounts, brokerage accounts, mutual funds, trusts, estates, commodity futures or options accounts and insurance policies with a cash value.
The reporting deadline is 30 June and the FBAR, Internal Revenue Service Form TD F 90-22.1, is not considered filed until it is received by the US Department of Treasury in Detroit, Michigan. Because 30 June, 2013, falls on a Sunday, FBAR filers should plan to have their 2012 FBARs received by the Treasury department, by this Friday, 28 June, Mr. Davis said.
It is also possible to file the report electronically until the day of the deadline.
Mr. Davis urged filers to contact their tax advisers or tax preparers to find out more about details about the FBAR filing requirements and any other related US filing requirements.
Foreign bank and financial report accounting also applies to business entities such as corporations, partnerships or limited liability companies created or organised under US law. As such the filing deadline also concerns employees or officers who have signatory authority over foreign accounts of US entities.