Mobility - June 2020 - 20

WORLDWIDE ERC ® GOVERNMENT AFFAIRS 2020

Expats Must Understand
and Comply With Foreign
Account Reporting Rules
By Peter K. Scott

In recent years, the U.S. government has engaged in
a more vigorous pursuit of taxpayers who hide assets
overseas to avoid U.S. tax responsibilities. The IRS
summoned information from credit card companies
about cards issued by foreign institutions, successfully obtained information from Swiss banking
authorities about Swiss bank accounts, conducted
three separate programs providing limited amnesty
for taxpayers who come forward to admit their past
transgressions, began numerous audits of taxpayers
identified as having foreign assets, expanded the
reporting already required under the law, and implemented new reporting regimes.
For U.S. employees overseas, the principal report that
must be understood and complied with is the Report of
Foreign Bank and Financial Accounts (the FBAR).

THE FBAR

Schedule B of the U.S. Form 1040 tax return includes
an often overlooked question as to whether the taxpayer had a financial interest in or signature authority
over any foreign financial account, such as a bank or
securities account. Many U.S. expatriates working
in foreign countries undoubtedly have their own
such accounts, or signature authority over employer
accounts. If the aggregate amount of such accounts
exceeds $10,000 at any time during the year, the
taxpayer is required to electronically file a separate
Treasury Department FBAR on FinCEN Form 114 by
15 April of the following year. However, that deadline
is automatically extended to 15 October if the report
is not filed by 15 April.
In recent years, the IRS emphasized the required
FBAR reporting. Worldwide ERC® members should

20 Mobility | June 2020

be aware of that and make sure that their employees are filing properly. The penalty for failing to file
is severe. Even an unintentional failure is subject to
a penalty of up to $10,000, and in recent cases the
IRS has taken the position that the penalty applies
to each account not reported, rather than only once
for the year of the failure. This view was upheld
in U.S. v. Boyd (C.D. Cal), on 23 April 2019. Other
such cases are pending.
The penalty for a willful failure can be the greater
of $100,000 or 50% of the amount in the account. In
2018, four cases were decided that disagree about
whether the penalty for willful failure is limited to a
maximum of $100,000 under regulations promulgated
by the Treasury Department before the statute was
amended in 2004 to escalate the maximum penalty to
50% of the amount in the account. Those regulations
have never been changed to reflect the 2004 amendment. Two courts held the IRS to the old regulations,
but two claims court cases allowed the higher penalty.
Expats sometimes overlook IRS requirements that
persons who have only signature authority over
foreign accounts-but no financial interest-must
nevertheless file the FBAR. The regulations eliminate the filing requirement for those who have only
supervisory authority over employees or officers who
have direct contact with the financial institution. But
employees or officers who have the authority to sign
checks on the company's account are required to file
FBARs and report the accounts even if the company
itself is already reporting them.
Consequently, officers or employees of foreign
subsidiaries of U.S. companies, for example, or
officers and employees of U.S. subsidiaries of foreign



Mobility - June 2020

Table of Contents for the Digital Edition of Mobility - June 2020

Mobility - June 2020 - Cover1
Mobility - June 2020 - Cover2
Mobility - June 2020 - 1
Mobility - June 2020 - 2
Mobility - June 2020 - 3
Mobility - June 2020 - 4
Mobility - June 2020 - 5
Mobility - June 2020 - 6
Mobility - June 2020 - 7
Mobility - June 2020 - 8
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Mobility - June 2020 - 60
Mobility - June 2020 - Cover3
Mobility - June 2020 - Cover4
https://www.nxtbook.com/ygsreprints/WERC/mobility-june-2021
https://www.nxtbook.com/ygsreprints/WERC/mobility-may-2021
https://www.nxtbook.com/ygsreprints/WERC/mobility-april-2021
https://www.nxtbook.com/ygsreprints/WERC/mobility-march-2021
https://www.nxtbook.com/ygsreprints/WERC/mobility-february-2021
https://www.nxtbook.com/ygsreprints/WERC/mobility_122020
https://www.nxtbook.com/ygsreprints/WERC/mobility_112020
https://www.nxtbook.com/ygsreprints/WERC/mobility_102020
https://www.nxtbook.com/ygsreprints/WERC/mobility_092020
https://www.nxtbook.com/ygsreprints/WERC/mobility_082020
https://www.nxtbook.com/ygsreprints/WERC/mobility_072020
https://www.nxtbook.com/ygsreprints/WERC/mobility_062020
https://www.nxtbook.com/ygsreprints/WERC/mobility_052020
https://www.nxtbook.com/ygsreprints/WERC/mobility_042020
https://www.nxtbook.com/ygsreprints/WERC/mobility_032020
https://www.nxtbook.com/ygsreprints/WERC/mobility_022020
https://www.nxtbook.com/ygsreprints/WERC/mobility_012020
https://www.nxtbook.com/ygsreprints/WERC/mobility_122019
https://www.nxtbook.com/ygsreprints/WERC/mobility_112019
https://www.nxtbook.com/ygsreprints/WERC/mobility_102019
https://www.nxtbook.com/ygsreprints/WERC/mobility_092019
https://www.nxtbook.com/ygsreprints/WERC/mobility_082019
https://www.nxtbook.com/ygsreprints/WERC/mobility_072019
https://www.nxtbook.com/ygsreprints/WERC/mobility_062019
https://www.nxtbook.com/ygsreprints/WERC/mobility_052019
https://www.nxtbook.com/ygsreprints/WERC/mobility_042019
https://www.nxtbook.com/ygsreprints/WERC/mobility_032019
https://www.nxtbook.com/ygsreprints/WERC/mobility_022019
https://www.nxtbook.com/ygsreprints/WERC/mobility_012019
https://www.nxtbookmedia.com