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April 15? Feh. Missing the June 30 foreign financial account deadline can be much worse.

June 23, 2009

While the April 15 deadline for 1040s is ugly enough, there are a lot of ways to deal with it. There are extensions, and even installment agreements. If you miss the deadline, the late filing penalty tops out at 25 percent of the underpayment -- not fun, exactly, but often manageable.

Now imagine that the penalty for filing a late 1040 were half the balance in your bank accounts, but no less than $10,000. But that's outrageous - they'd never be that nasty, would they?

Yes they would. And they are. Just not for your 1040.

Foreign Bank Account Reports due June 30

The horrific penalty of 50 percent of the highest balance in a bank account for the year, but no less than $10,000, applies for late filers of Form 90-22.1, the Report of Foreign Bank and Financial Accounts. It is due June 30, and no extension is available. What's worse, you might need to file the form -- sometimes called the "FBAR" form -- even if you don't own a foreign bank account.

You are required to file the FBAR if you are a "United States person" and you have either

- A financial interest, or
- signature authority

over foreign financial accounts exceeding $10,000 in aggregate.

If your business keeps a bank account in Canada or China because you buy things there, the business needs to file -- as does everybody in your company with signature authority on such an account, down to the payables clerk who signs checks attached to your approved Chinese purchase orders. An exception may apply to employees of some larger companies.

Of course you don't have to have a business to have a foreign bank account. The FBAR requirements apply, for example, to personal bank accounts you might have opened while on a temporary overseas assignment. They also apply to accounts with offshore gambling Web sites.

Be sure to document your filing! FBAR filings must be postmarked no later than June 30. While it is always a good idea to send tax filings Certified Mail, Return Receipt Requested, it's especially important with FBAR reports. Practitioners report that the Detroit Service Center, where the reports are filed, throws away the postmarked envelopes the forms come in. Then the IRS (outrageously) asserts penalties for forms that come in as early as July 2. When that happens, a postmarked certified mail receipt, which costs $4.90, can save you $10,000 or more.

If you have missed prior FBAR deadlines, consider taking advantage of the current IRS semi-amnesty that runs into September.

This post originally appeared at Iowabiz.com, the Des Moines Business Record's blog for entrepreneurs.

Tags: FBAR.