If you own or have authority over a foreign financial account, including a bank account, a unit trust, mutual funds or other types of financial accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) to the IRS by June 28, 2013. Even if you’re not a signer on the account, your status as an officer or manager for the entity that controls it could make you responsible for disclosure.

Penalties vary by severity, but can climb to $100,000 for willful civil infractions ($10,000 for nonwillful infractions) and to $500,000 and 10 years in prison for criminal violations.

Why is it necessary?

Anyone who is a citizen of or resident in the United States, or has a business there, is generally allowed to own a foreign account. The FBAR is a tool to help the federal government identify those who may be using foreign financial accounts to circumvent various U.S. laws.

Investigators use FBARs to help identify, or trace, funds used for illicit purposes — or to identify unreported income kept or generated abroad. Here’s an overview of what the form requires.

Who must file, and when?

Specifically, you’re required to file the report if:

  1. You or your business has either a financial interest in or signature authority (or something comparable) over one or more accounts in a foreign country, and
  2. The aggregate value of those accounts exceeds $10,000 at any time during the calendar year.

The law applies to most areas outside the United States, Puerto Rico and U.S. territories and possessions, such as the U.S. Virgin Islands and Guam.

FBAR reports are normally due annually at the end of June and cover the previous calendar year. So, for example, a report for the period of Jan. 1, 2012, to Dec. 31, 2012, is due on June 28, 2013.

The IRS is responsible for investigating possible civil violations, assessing and collecting civil penalties and issuing administrative rulings. The Department of Justice is responsible for criminal violations.

For help assessing your foreign account situation, contact Doeren Mayhew’s Michigan CPAs, Houston CPAs or Ft. Lauderdale CPAs.