NEW UPDATE: The IRS has extended the amnesty program’s
deadline from September 23, 2009 to October 15, 2009.
See below for details of the amnesty program.


New Requirements Related to the Foreign Bank Account
Reporting form (“FBAR Form”)

October 2009 To Our Clients: Many of you may have heard about the new requirements related to the Foreign Bank Account Reporting form, or the “FBAR Form.” You may also have received information from brokers and fund managers regarding the filing of this Form. The Internal Revenue Service (IRS) has expanded the definitions of accounts that are now reportable on this Form. Unfortunately, the expanded definitions are vague and have caused great confusion. Many firms, including Maloney + Novotny, have written to the IRS for clarification. During a recent American Bar Association teleconference, an IRS panelist suggested that having an interest in an investment fund (e.g., hedge fund) that is domiciled outside the United States requires the filing of the FBAR Form (Form TD F 90-22.1). While this individual’s opinion is not binding on the IRS, we are concerned that this may become the official position of the IRS. POTENTIAL FILERS AND AMNESTY PROGRAM The following groups may be required to file the FBAR Form under the new definitions if they have foreign-domiciled investment funds: Individuals Individuals with signature authority over foreign-domiciled accounts Corporations, partnerships and limited liability companies Not-for-profit organizations Retirement plans Individual retirement accounts (IRAs) The FBAR Form is required to be filed annually on June 30. The Department of the Treasury has a program which grants filers amnesty from penalties if the FBAR Forms are filed by October 15, 2009. This amnesty program includes Forms which were due on the recently passed deadline of June 30, 2009. NOTICE 2009-62 The IRS recently released Notice 2009-62, which provides an extended filing deadline for the FBAR Form for these 2 groups: Persons with no financial interest in a foreign financial account but with signature or other authority over the account; and Persons with a financial interest in (or signature authority over) a foreign financial account in which the assets are held in a commingled fund. Note that the term “persons” above refers to all potential filers (individuals, businesses, retirement plans, etc.). Persons and/or entities in the above two groups now have until June 30, 2010 to file an FBAR Form for 2008 and earlier calendar years. Note that Notice 2009-62 does not grant an exemption to these groups from filing the FBAR Form; it merely extends the time for filing. A foreign commingled fund is generally a fund in which foreign securities, securities derivatives, or other financial instruments of different owners are held together and each owner holds an equity interest in the fund. The IRS states that such an arrangement includes a mutual fund. PURPOSE OF FBAR FILING AND TIPS FOR COMPLETION The purpose of the FBAR Form is for the Department of Treasury to collect information about foreign accounts and investments to monitor for tax avoidance, money laundering, and funding of terrorist organizations. Failure to file Form TD F 90-22.1 carries substantial penalties. For a willful violation, the penalty can be as high as the greater of $100,000 or 50% of the amount in the foreign account. For a non-willful violation that is not corrected and for which there is no reasonable cause, the penalty can be as high as $10,000. Criminal penalties can also be levied for willful violations. Because of the severity of these penalties, we are recommending that you consider filing the FBAR Form if you have foreign-domiciled investment accounts. You may wish to contact your investment advisor to assist in the determination of whether any of your investments or accounts are domiciled in a foreign country. While this is not an all-inclusive list, here are some tips and other information that you may find helpful in completing Form TD F 90-22.1: Reporting is required for all financial interests in or signature authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, if the aggregate value of these accounts exceeds $10,000 at any time during the year. The reporting period for this Form is the calendar year 2008. The accounting period of the filer (e.g., July 1 through June 30) is not relevant. The “maximum value of the account” is the largest amount of currency or non-monetary assets that appears on any quarterly or more frequent account statement issued for 2008. If periodic account statements are not issued, the maximum account value is the largest amount of currency or non-monetary assets in the account at any time during the year. If the filer has a financial interest in 25 or more foreign financial accounts, the filer can check the box in Item 14 on the Form and indicate the total number of accounts the filer has. Such filer does not have to complete Parts II or III of the Form. However, the filer must maintain records of all of the information asked for in Parts II and III of the Form for each account. This information must be maintained for 5 years and must be made available to the Department of the Treasury if requested. The Form must be received by the IRS by the respective deadlines mentioned above (October 15, 2009, or June 30, 2010). A postmark is not sufficient. There are some additional requirements for filers to utilize the amnesty program. Please contact us to discuss those additional requirements. We apologize for the short notice, but this issue developed only within the last few weeks. Notice 2009-62 was issued just a few days ago. We have attached a PDF version of Form TD F 90-22.1 for your use and the instructions for the Form. Of course, we will be happy to assist in the preparation of the FBAR Form, if needed. If you have questions, please call Chris Anderson (216-344-5268) or Dave Reyes (216-344-5233) at Maloney + Novotny.

DOWNLOAD FORM Form TD F 90-221 [554 KB] CONTACT INFORMATION Chris Anderson Shareholder, Maloney + Novotny 216.344.5268 canderson@maloneynovotny.com Dave Reyes Shareholder, Maloney + Novotny 216.344.5233 dreyes@maloneynovotny.com