IRS Issues Guidance On Offshore Account Tax Filings

NEW YORK (Dow Jones)--The Internal Revenue Service on Wednesday issued updated guidance on who must file a key tax form that reports on offshore investments.
In the guidance, the agency attempted to answer a number of questions about the FBAR, or Report of Foreign Bank and Financial Accounts.
The new guidance comes amid growing concern by tax advisers over whether their clients are complying with FBAR requirements as the IRS cracks down on offshore tax evaders.
Advisers have been confused over a number of FBAR issues and have been scrambling ahead of a June 30 FBAR filing deadline to meet requirements.
On Wednesday, the IRS also gave some taxpayers more time to file the FBAR. Taxpayers who have reported and paid tax on all of their 2008 taxable income, but can show they only recently learned they must file the form, now have until Sept. 23 to do it.
Among the questions addressed by the new guidance are whether everyone with signature authority over a trust account must file delinquent FBARs, and whether child signatories on a jointly owned foreign account must file the form.
Many tax advisers have been worried about whether clients with offshore investments through hedge funds, private equity and other funds must file an FBAR.
While the new guidance didn't address that question, an IRS official in an interview with Dow Jones said an FBAR is required if the offshore investments through a hedge fund or other vehicle total $10,000 at any time during the tax year.
This rule has been on the books, but many hedge fund investors haven't complied with it, and the issue has been causing a great deal of anxiety of late.
Bryan Skarlatos, a partner at New York law firm Kostelanetz & Fink, said that there are conflicting opinions about whether a person with an interest in a foreign hedge fund is required to file an FBAR.
The FBAR guidance to date is "very general and sometimes ambiguous, and it is insufficient to cover the myriad of situations that arise in everyday life," Skarlatos said.

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