If you, or your ministry or business, own an overseas financial account, you are required to file an FBAR annually. This is also called a Report of Foreign Bank and Financial Accounts, or Form 114. This would also include accounts for which you have signature authority.
Deadline extended for filing report on cash held overseas –more background on implications of FBAR reporting – part 2June 20, 2011, 8:07 am
This series of posts is discussion the FBAR in general and an extension of the deadline to file the reports from 2009 and earlier. It is important to note the deadline for filing the 2010 reports is still June 30, 2011. Not much time left for those reports.
Previously discussed the filing requirements for the FBAR report and how that would fit into the operations of an NPO with overseas activities.
How does this get messy for a mission organization?
How else could the usual functioning of a foreign mission organization create filing requirements? Let’s say you have missionaries located in the field who have a local bank account. While they likely are drawing a very modest salary, the situation could easily develop where staff could cross that $10,000 cutoff in their account and have to file a report. Merely send someone funds to buy a vehicle, for example. Your program manager and assistant manager sign on the account used for the office expenses, so they each have a personal filing requirement.
Deadline extended for filing report on cash held overseas – that FBAR report applies to NPO’s – part 1June 17, 2011, 10:50 am
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.
Here are a few of the comments from the May 24, 2017 Not-for-profit conference presented by California Society of CPAs that I thought would be of interest to others in the nonprofit community. Since all comments are the opinion of the speaker, neither their names nor organizations will be mentioned. The ideas mentioned can stand or fall on their own.
This is the first of two posts. The next discussion will address changes in financial statement presentation outlined in ASU 2016-14. In this post: tax, revenue recognition, and single audit.
- It might just be possible that filing a form 1023 or 1023-EZ is so easy that people can get exempt status for an organization without knowing the requirements to properly operate a charity and maintain exempt status. In examinations to follow-up after exempt status is approved, the IRS is finding a lot of charities are out of compliance.
- One of several focuses of the IRS is filing of FBARs, those forms used to report overseas bank accounts. One ripple effect of chasing money laundering is the impact on charities who have overseas accounts. Even though there is minimal risk of those accounts being used for tax evasion the FBAR filing requirement still apply. As a reminder, the deadline for filing FBARs is now April 15 with a six-month extension available.
Doing ministry overseas can generate several requirements to file reports with the IRS that you had no idea even existed.
CliftonLarsonAllen provide some background on IRS Foreign Reporting Requirements for Nonprofit Organizations.
Here is their technically worded description of the most common situations:
- Transfers of property to, or ownership interests in, foreign entities
- Financial interest in, or signature authority over, foreign bank, securities, and financial accounts
- Certain payments of U.S. source income to foreign persons
I will mention just a few of the situations they describe which could trigger a reporting requirement. Keep in mind there can be some serious penalties for missing these reports. Serious, as in $10,000 per filing year, assuming the IRS doesn’t allege the failure to file was willful. If they raise that allegation, penalties can get really ugly. Also keep in mind that if you missed one of these reports once, you probably missed it all the years for which the statute of limitations is open.
Control of overseas affiliate
The June 30 deadline is rapidly approaching to file the FBAR reports for overseas bank accounts on which you have signature authority when the account holds $10,000 or more at any time during the year.
For mission organizations, think about those checking accounts you have in the field used to fund your local activities. If those accounts have more than $10,000 in them at any point during the year your organization has a filing requirement.
If you are in the finance area and have signature authority on one of those accounts, you personally have a filing requirement.
There’s no extension for the deadline. The penalties could get nasty.
Kelly Phillips Erb provides a great summary: IRS Issues Reminder As Taxpayers Near Deadline To Report Foreign Accounts, Assets.
Here is her technical summary:
Here are a few articles on my growing backlog of ideas of interest to charities. Quick updates on a variety of topics: general reminders, maintain control over funds sent overseas, FICA taxes on 403(b) contribution, short list of regs impacting a missionary sending church, and cell phones as de minimis fringe benefit.
Here’s the issue: The federal government has a requirement to file a specific report if you have financial accounts outside the U.S. that have more than $10,000 in the account at any point during the year.
This filing requirement applies to the organization and any individual with signature authority on the account. That means your ministry must file reports (if your accounts clear the threshold on any day of the year) and every check signer must as well.
For just a little more detail, you can read the other posts on this blog at this tag.
If you want some deep detail, check out an article by Karen Nakamura, at Corporate Taxation Insider: Foreign bank account reporting.
Do you use an overseas bank account in your ministry? Then you may have a filing requirement for that account.December 18, 2013, 9:03 am
If your ministry uses an overseas bank account to further your mission, you may have a requirement to file a report called an FBAR if the balance is over a certain amount at any point in the year.
Even worse, if individuals in your organization, like you Ms. CFO or Mr. Treasurer or Mrs. Program Manager, have signature authority over that account, the individuals have a requirement to disclose that authority on their personal 1040. The individuals may also need to file an FBAR individually.
The IRS has a major push underway to identify people who have hidden cash overseas to avoid paying taxes. That enforcement effort is obviously not a big deal to the nonprofit community.
However, the reporting requirement still applies to ministries that have cash located in their overseas programs.
Here’s the issue: If an individual or organization has ownership or signature authority in an overseas bank account that goes over a mere $10,000 at any point during the year, there is a report that has to be filed by June 30 of the following year.
Even though the severe penalties are intended to encourage people to report all their taxable income, those filing requirements and heavy penalties could create serious problems for an NPO.
If your ministry has cash located overseas, you really need to pay attention to this reporting requirement.
Here is some background that the IRS sent out today in an e-mail update to NPOs:
The headline of a great article, Foreign Payees, Activities, and Financial Accounts Increase Your Compliance Burden, points towards an answer of yes.
CPAs Daniel Skerbitz and Laurie Gnad, of Stanfield & O’Dell, provide a great introduction to the extra reporting paperwork that arises for overseas missions or even dealing with foreign missionaries when they are in the U.S.
Deadline extended for filing report on cash held overseas – opportunity to get all reports filed – conclusionJune 27, 2011, 11:04 am
I have several posts about the mandatory report of overseas bank accounts. This issue can easily involve NPOs that have overseas operations. The form used to report and the whole process is referred to as FBAR. Actual name is Report of Foreign Bank and Financial Accounts.
Extension of deadline
The IRS has extended a deadline for filing the FBAR reports for 2009 and earlier. The new deadline is November 1, 2011.
This means “persons” could catch up on the filing of all those reports that had never been filed. Persons include NPOs with bank accounts used in overseas projects.
By the way, the extension does not apply to the 12-31-10 reports which must be filed by 6-30-11.
Previously discussed the FBAR report and additional background on how easy it is for an NPO with overseas activity to generate a requirement to file the report. Will get back to the extended deadline, but need to look at the downside of not filing.
This is where things get ugly. The FBAR report says the penalty for a person who fails to properly file is a civil penalty up to $10,000. This applies to organizations also. If there is reasonable cause, then no penalty will be imposed.
It gets worse.