Federal law requires filing a report with the Treasury Department when you have foreign bank accounts with balances over a certain amount. This law applies to NPOs.
Deadline for filing all of the past reports has been extended by the IRS.
How can this be an issue in the nonprofit community? If you have field programs and a local bank account to pay bills then this requirement could kick in. It is my personal perception there may be some mission organizations that have a filing requirement but are not doing what they need to do.
I will give a little background, explain why this is an issue for the nonprofit community, and then describe the extended deadline.
The report has a very cumbersome name. It is Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). It is usually referred to as the FBAR. Don’t ask me how you get that report name condensed into the letters FBAR. Doesn’t make sense to me, but this is one of many situations where the regulators did not ask my opinion. I guess that’s a better name than having everyone referred to it as the tee-dee-eff-ninety-dash-twenty-two-point-one.
The Journal of Accountancy has a great one sentence summary of the filing requirement
United States persons with a financial interest in, or signature authority over, any financial accounts (including bank, securities or other types of financial accounts) in a foreign country must file an FBAR if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
Now let’s expand that from whatever language it is into English.
This requirement applies to individuals and organizations. Your field staff who are US citizens, your home staff who have signature authority in field bank accounts, and your organization are all “United States persons” and are required to comply.
If you own, benefit from, or even are an authorized signer on an account, you have a potential filing requirement. This applies to checking accounts, savings accounts, brokerage accounts, postal accounts, securities etc.
If the balance in the accounts exceeds $10,000 at any point during the year, the filing requirement applies. In the typical operation of a field program it would be really easy to cross that $10K cutoff. Transfer enough funds to the field location to take care of the costs for a month or more and you could easily be over that cut off on the day the wire transfer arrives. Even though your average balance might be a few hundred dollars over the course of the year, going over the cut off on one day generates the filing requirement.
Previously, I thought this $10,000 cutoff applied to each account, but the article in the Journal of Accountancy suggests that this is cumulative. The instructions to the form say the FBAR must be filed:
if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
That looks like a cumulative requirement to me. If that’s the case, it would be difficult for a nonprofit organization with multiple field offices to not go over the $10,000 cutoff.
The Journal of Accountancy article is IRS further extends deadline for certain 2009 and earlier FBARs
Follow-up posts at:
- Deadline extended for filing report on cash held overseas –more background on implications of FBAR reporting – part 2
- Deadline extended for filing report on cash held overseas – penalties for not filing – part 3
- Deadline extended for filing report on cash held overseas – opportunity to get all reports filed – conclusion