I’ll be transmitting my first few tax returns to the IRS this coming week. As I looked at Schedule B, I noticed a change in the questions at the bottom of Schedule B:
7a At any time during 2011, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions
Hmmm, that’s different. Let’s see what the instructions have to say:
Line 7a–Question 1. Check the “Yes” box if at any time during 2011 you had a financial interest in or signature authority over a financial account located in a foreign country. See the definitions that follow. Check the “Yes” box even if you are not required to file Form TD F 90-22.1.
So for the first time the IRS is demanding that if you had a foreign financial account and it had $1 in it, you must check the box. And since a tax return is signed under penalty of perjury, I will be asking you whether or not you had a foreign financial account in 2011.
Note that this is also a new reason someone may have to file a tax return. As noted on the instructions, this question must be completed if you had a foreign account during the year. Thus, some individuals who have no income but have small foreign financial accounts (valued at less than $10,000) will have to file a tax return for 2011.
As Joe Kristan and others have said, the IRS continues to aim its guns at the jaywalkers.
Tags: FBAR
Hey Russ: Saw this change too. Not sure about your conclusion. What if you had too little interest to have to attach the Schedule B? Or what if the foreign account did not generate any interest to be reported on Schedule B? Do you still have to file a return in those cases just to report a foreign bank account with de minimis interest? Not sure of any of this at this point.
If anyone has a foreign financial account–say a Canadian bank account with $1 that pays no interest–they must note that on Schedule B. Such an individual wouldn’t have to file an FBAR, but the mere existence of an account must be noted.
Part III of Schedule B is only required if interest or dividends exceed $1,500.
I disagree that the foreign account disclosure alone would require a person to file a tax return if that person did not meet the general requirements to file.
Well, it’s subject to debate, but my read is that a return must be filed to note the FBAR. I haven’t asked this of the FINCEN FBAR group in a couple of years, but when I did their answer was that a return must be filed if the FBAR requirement is triggered. Clearly, if a Form 8938 is required, a return must be filed.