It brings to mind Emily Litella. “Never mind,” says the IRS.
The IRS just announced that — despite the changes to the FBAR instructions made effective January 1, 2009 — nonresidents do not have to file Form TD F 90-22.1. Only citizens, U.S. residents, and domestic entities need to do so.
Announcement 2009-51
Temporary Suspension of FBAR filing Requirements for Persons who are not Citizens, Residents, or Domestic Entities
June 5, 2009
The Internal Revenue Service is temporarily suspending the reporting requirement with respect to foreign bank accounts (Form TD F 90.22-1 (Report of Foreign Bank and Financial Accounts) due on June 30, 2009, for those persons who are not citizens, residents, or domestic entities. The revised Form TD F 90.22-1 (October 2008) was issued with a change in the instructions to the definition of “United States person.” The IRS has received a number of questions and comments from the public concerning the new filing requirement that may require additional guidance.
To reduce the burden on the public with respect to FBARs due on June 30, 2009, all persons may rely on the definition of “United States person” found in the instructions for the prior version of the FBAR (the July 2000 version) to determine whether they have an obligation to file an FBAR. The definition of “United States person” from the prior version is as follows:
United States Person The term “United States person” means (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.
The definition of the term “United States person” from the instructions for the prior version of the FBAR form may be relied upon for purposes of determining who must file an FBAR. All other requirements of the current version of the FBAR form and instructions (revision October 2008) are still in effect. The current version of the form must be used when filing an FBAR.
The substitution of the definition of “United States person” from the instructions for the prior version of the FBAR applies only with respect to FBARs due on June 30, 2009. Additional guidance will be issued with respect to FBARs due in subsequent years.
The Service invites interested persons to submit comments regarding the revised FBAR form and instructions (revision October 2008). Please submit comments by August 31, 2009 to: Internal Revenue Service, CC:PA:LPD:PR (Announcement 2009-51), room 5203, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions also may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (Announcement 2009-51), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue N.W., Washington, DC. Alternatively, taxpayers may submit electronic comments directly to the IRS e-mail address: notice.comments@irscounsel.treas.gov (attention: Announcement 2009-51).
The principal author of this announcement is Adrienne Mikolashek of the Office of Associate Chief Counsel (Procedure and Administration). For further information regarding this announcement contact Adrienne Mikolashek at 202-622-4940 not a toll-free call).
What does this mean to you?
- If you are a nonresident of the United States and you were concerned about getting caught up in this new requirement, you have a temporary reprieve. You do not need to file Form TD F 90-22.1 at this time.
- Don’t go to sleep. The danger is not gone. It will be back for calendar year 2009 and future years. We just don’t know what the exact requirements will be.
- Look at the way you have configured your U.S. investments and U.S. business operations. Make changes now. This is an unexpected window of opportunity to restructure your affairs. Seize it.
{ 1 comment… read it below or add one }
Phil,
The recent decision by the IRS to pull in its horns on enforcing the FBAR against NRAs is mounting evidence that Treasury is beginning to better understand the true functions of the FBAR filing requirement. In my view, in ascending order of importance they are:
1. “to assure maintenance of reports where such reports or records have a high degree of usefulness in criminal, tax or regulatory investigations or proceedings.”
2. to provide employment opportunities in the economically beknighted Detroit, Michigan for constituents of important committee chairmen.
3. to backstop the current campaign against US tax evaders with accounts in Swiss and other tax haven banks.
4. to function as a tarif on capital flows leaving the US or to non-US financial institutions that compete globally with US financial institutions for deposits and/or management fees.
The “valuable law enforcement tool” is and always was patent nonsense. One of the reasons FBAR enforcement was dormant for so long is that the data it collects is logically useless to law enforcement. The fact that no such detailed information is required if you own an interest in more than 25 accounts is indicative of this.
I suspect that a major reason the IRS is having a hard time clarifying what it wants on a FBAR is that the IRS does not really want any of the information. Neither the IRS nor the FINCEN ever had any positive use for it. Indeed, since, as I argue above, one of the major real functions of the FBAR is to exercise leverage over taxpayers, FBAR non-filing or non-compliance is actually an institutional plus.
In addition, since an evolving purpose of the FBAR requirement is to criminalize and/or otherwise burden capital flows to destinations outside the US, the more occult and intransparent the filing requirements are and the more draconian the penalties for failure, untimeliness or error, the more likely the filer will have to retain and pay for advice to fill the thing out properly. The resulting financial burden on the ownership of foreign accounts gives a competitive advantage to domestic financial institutions.
Another indication that the FBAR is now intended as a punitive threat and financial burden on the “masses” is that the $10,000 value threshold remains the same as when the first FBAR was required in 1970.
To illustrate the ravages of inflation and devaluation of the US dollar on the value of $10,000: In 1970 the average monthly US Social Security retirement check for men and women was $123.82 or $1,485.84 a year. In 2004 the average monthly benefit was $954.90 or $11,458.80 – well over the annual $10,000 threshold. By now (2009) the retirement average benefit is probably about 10 times what it was in 1970.
Every month the Social Security Administration, the Department of Defense and (to a lesser extent) the Office of Personnel Management automatically deposit payments to the foreign bank accounts of American citizen retirees and survivors living abroad. Given nearly 40 years of inflation and the static $10,000 threshold filing requirement, the odds are good that a very high proportion of those payments go to accounts that are now subject to FBAR reporting – and confiscation for non reporting.
The corollary to all this is that if you make the mistake of imposing the FBAR “tarif” on foreign capital inflows as the IRS was threatening, then you run the risk of defeating this increasingly important purpose of the FBAR and shooting your own country in the financial foot.
Hence, the recent “never mind” from the IRS.
As in the golden days of “Smoot-Hawley” look for other developed countries to reciprocate with FBAR Follies of their own stripe.
John Nolan
Frankfurt am Main