U.S. Nationals and FBAR – First American Indicted

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First American national indicted, faces 10 years prison and US$500,000 in fines

Jul. 8 – As we advised last week, U.S. nationals operating bank accounts overseas – including accounts for representative offices, WFOEs or other businesses in China – must have completed the new FBAR filings to the U.S. Internal Revenue Service (IRS).

Due at the end of last month, U.S. executives that missed this deadline may still be able to make a voluntary disclosure under the IRS’s Offshore Voluntary Disclosure Initiative (OVDI) and avoid or decrease penalties. The OVDI is open until August 31, 2011 and certain individuals may be entitled to an extension.

The situation has become critical for overseas Americans as we learn of the first U.S. national to be indicted. An American client of HSBC India has been charged with four counts of failure to file a Foreign Bank Account Report, form TD F 90-22.1 (FBAR). The full story is featured on our India Briefing web site here.

The charges are the first signs that the IRS is getting very serious about FBAR filings and intends to take a zero tolerance approach to non-compliance. U.S. executives operating bank accounts in China or elsewhere are advised to take immediate action to get into compliance. Details of the filing procedures, complete with downloadable forms, were made available by us on China Briefing here. We recommend such executives seek immediate advice in the United States to get into compliance.

Further advice may also be provided by Dezan Shira & Associates, please contact the firm at tax@dezshira.com if in need of assistance.