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Foreign Accounts

The supporting schedule in U.S. individual tax returns supporting Interest and Dividends, Schedule B, has a question relating to the taxpayer's interest in foreign bank accounts or trusts. Where the aggregate value of the taxpayer's bank securities or other foreign financial accounts exceeds $10,000 U.S. at any time during the calendar year, the taxpayer must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. The due date for this report is June 30 -- it is not extended along with a tax return. Click here for a copy of Form TD F 90-22.1.

The intent of Foreign Bank Account Reporting is to detect money laundering and illegal payments, but it covers all U.S. persons.  A civil penalty of up to $10,000 may be imposed for failure to report--regardless of willfulness--with additional civil and criminal penalties for more serious willful violations.  The IRS has announced in November 2008 that it intends to enforce penalties for noncompliance as far back as 6 years. 

These are serious provisions with serious consequences.  If you have foreign financial accounts, including Canadian RRSP accounts, you must report them.

In addition to the foreign bank account reporting discussed above, there is a requirement to report all foreign investments in your tax return where the total of the maximum value those investments during the year is $50,000 or more.  This includes such investments as individual security issues.  The details required include the name and address of the issuer and account numbers, as well as the value.  It would be wise to begin accumulating that information early in 2013, so you are not burdened at tax filing time.