Foreign Bank Account Reporting Relief and Limited Amnesty Program

Proving that sometimes you have to check in places that don’t appear to be the appropriate location to find revised IRS guidance for your client, the IRS inserted a combination amnesty and extension of time to file foreign bank account reporting forms normally due each June 30 into a revision of the document that describes their voluntary disclosure program for those who failed to report offshore income. The Offshore Income Voluntary Disclosure Program FAQ as revised on June 24 notes that this program is only meant to apply to those that have failed to report income, so wouldn’t be applicable to the issues related to a late filing of the foreign bank account. However, the FAQ on page 3 then goes on to establish a new program to handle these matters.

The program allows those who have not filed their Form TD F 90-22.1 for prior years, but who have properly reported all income from those accounts, to file the late returns by September 23, 2009 along with copies of their income tax returns for the affected years with the Philadelphia Offshore Identification Unit at the address contained in the FAQ. If they do so, the IRS will not assess what are otherwise very onerous late filing penalties.

The following day, on the IRS website, the IRS clarified that this relief would also extend to 2008 FBAR reports if taxpayers find that they cannot obtain the necessary information to file the report by the June 30, 2009 deadline. Those taxpayers would again have until September 23 to file the report with the Philadelphia unit, along with a copy of their 2008 return. The website noted that if the 2008 return was not yet due, no copy of the return would be required. Unfortunately, while that suggests that returns on extension would qualify (no return would need to be sent), the language is not quite as clear as we might like on that matter.

Given the IRS has now created an amnesty program for these forms, it may be appropriate to query your clients about whether they might have any such offshore accounts that should have been reported, and consider filing the reports for prior years under this program. Prudence suggests that the IRS might decide that since they had made available this program, anyone who fails to take advantage of it might later find the IRS much less likely to be liberal in granting relief should the matter be discovered in later years.

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