Archive for the ‘FINCEN’ Category

FBAR Deadline Is June 30th, but It’s Not a Midnight Deadline

Thursday, June 26th, 2014

Almost every tax deadline is a postmark deadline. If your return is postmarked by midnight of the deadline day it’s considered timely filed. If you file it electronically, and it’s filed by midnight, it’s timely. Of course, with every rule there’s an exception. That exception is definitely the FBAR.

The FBAR–Report of Foreign Bank and Financial Accounts–must be electronically filed. It’s due on June 30th and there are no extensions. So if I file it by midnight local time on June 30th I’m fine, right?

My software company says no. Here’s the message they sent me:

As a reminder, taxpayers that are required to report foreign bank and financial accounts must file Form 114 electronically by June 30th, and the returns must be either Accepted or Accepted with Errors by midnight, June 30th. We strongly recommend that 114 returns be filed no later than 6PM in your time zone to allow for agency processing. FinCEN does not recognize an e-postmark to timely filing, unlike the IRS. Additionally, there is no extension of time to file 114 FBAR returns.

So I took a look at an FBAR I submitted this past week:

Yes, it took over two days to accept the FBAR…and that’s what I’ve been seeing consistently. Assuming my software company is right, that means the true deadline for FBARs is Saturday…which I find hard to believe. I doubt a court would look at an FBAR filed on June 30th (during normal hours) as untimely but who knows? I’ve seen too many strange things with the FBAR this month.

My advice is simple: File the FBAR asap–it at all possible by Saturday. You’re likely fine if you file it by 6 pm in your time zone on Monday, but the penalties are ridiculous on this. As an aside, I searched the FINCEN website, their FAQs on the FBAR, and the IRS website pages on the FBAR to see if I could find any confirmation of what my software company said. I couldn’t; unfortunately, that doesn’t mean it’s not true.

Just File the FBAR

Wednesday, June 18th, 2014

Several of our clients have asked, “The decision on poker accounts being ‘banks’ is nonsensical. Do I really have to file an FBAR for those accounts?”

I am in general agreement with the individuals questioning the ruling. Banks and financial institutions generally offer investments, credit cards, loans, checking accounts, securities, and similar products. An online gambling site does take client’s money–but solely so that the client can gamble.

The United States has, for various laws, lumped casinos in with banks. For example, casinos fall under the same currency transaction reporting rules as banks. If you take $20,000 into your local casino and deposit it at the casino cage, a Currency Transaction Report is supposed to be issued. Casinos have to issue Suspicious Activity Reports.

If you go back to 2009, the FBAR was required for online gambling accounts. (That was the advice given to us from the IRS FBAR group.) In 2011, when new regulations came into play, the IRS no longer said that. The new regulations appeared to make an online gambling site not a reportable foreign financial account.

However, a federal judge disagreed.

Section 5312(a)(2) lists 26 different types of entities that may qualify as a “financial institution.” Based on the breadth of the definition, our court of appeals has held that “the term ‘financial institution’ is to be given a broad definition.” United States v. Dela Espriella, 781 F.2d 1432, 1436 (9th Cir. 1986). The government claims that FirePay, PokerStars, and PartyPoker are all financial institutions because they function as “commercial bank[s].” Section 5312(a)(2)(B). The Fourth Circuit in Clines found that “[b]y holding funds for third parties and disbursing them at their direction, [the organization at issue] functioned as a bank [under Section 5314].” Clines, 958 F.2d at 582 (emphasis added).

It may be that this decision will be reversed. It’s possible another court would come to a very different conclusion. But the laws on the FBAR are draconian, including willful penalties that are a minimum $100,000 fine. My thinking is simple: I’d rather be safe than sorry. Thus, my strong advice is, “Just file the FBAR.”


We sent out a special newsletter to our clients on this issue. Here’s what we wrote:

The FBAR is due June 30th and there are no extensions. There are significant penalties (including possible imprisonment) for FBAR mistakes.

The general rule on whether you have to file an FBAR is if you have $10,000 or more aggregate in one or more foreign financial accounts at any time during the year you must file an FBAR. If your aggregate balance remained under $10,000, you will not have an FBAR filing requirement.

Even if you don’t have an FBAR filing requirement you must still disclose your foreign financial accounts on your tax return. At the bottom of Schedule B are a few questions which include, “At any time during 2013, 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?” This question must be answered yes if you have a non-US based online gambling account.

There are two choices in filing an FBAR. We can file it for you (we would need you to complete and return Form 114a; if you need us to send you this form, let either Aaron or me know) or you can file it yourself at the BSA efile system.

Here are answers to some questions relating to this issue:

1. I had $6,000 maximum in my PokerStars account. I cashed it out and moved that same $6,000 into my foreign bank account. Do I need to file an FBAR? No. You never reached $10,000 aggregate in your foreign financial accounts.

2. I already filed my FBAR for 2013 but I have online gambling accounts that must be reported. What do I do? You will need to file an amended FBAR.

3. My tax return has already been filed; I did not note any foreign financial accounts on Schedule B. Will I need to amend that return? Yes.

4. Do online gambling accounts count for Form 8938 on the tax return? (Form 8938 is similar to the FBAR and reports certain foreign financial accounts.) Yes

5. Do I need to go back for prior years and file amended FBARs and tax returns? This is unclear at the present time, but the answer is probably yes. The statute of limitations on FBARs is six years from the due date, so 2009-2013 are open (2008 will be beyond the statute of limitations on July 1, 2014). However, gambling accounts were considered foreign financial accounts for 2009, so this impacts solely 2010-2012 for FBAR purposes. For tax returns, only 2011 and 2012 are open (assuming timely filing). Note also that the first year for Form 8938 was 2012.

I and other practitioners have asked the IRS and FINCEN for more information regarding this. I do expect to obtain a response regarding this within a couple of weeks. I will be updating this issue on my tax blog (http://taxabletalk.com) when I have more information.

6. My only online gambling accounts are in Nevada and New Jersey with the regulated sites in those states. Do I need to file an FBAR? No. Those accounts are not considered foreign financial accounts.

7. My online gambling accounts are with current US-facing sites; their legality is questionable. Must I report my accounts on an FBAR? Yes, as long as you have $10,000 or more aggregate in one or more such accounts.

8. Can I access my PokerStars and Full Tilt Poker accounts while in the United States? Yes, you can. PokerStars sent us instructions on how to do this:

Your deposit, cashout, transfer and playing transaction history is now available for request directly from the PokerStars software. To request this information from the PokerStars Lobby screen, select:
‘Requests’ -> ‘Playing History Audit’
From the pop-up window that appears, you can select a date range to request the specific information required. You will also need to select a password for the file. You may choose any password you wish; however, we do not recommend using the same password as for your PokerStars account. If you wish to view your FPP/VPP information, please ensure the relevant box is checked.
Finally, you will need to select the output format. The options available are Excel (97-2003), HTML and a text file. Then click on OK to submit the request. You will be prompted to enter your PokerStars password to confirm the request. An email with further instructions will be sent to your registered email address.
If the file provided will not open, it indicates you have an older compression program that does not support the encryption used on the file. To resolve this and open the file, you will need to update your compression program or download a new compression program. We recommend using WinZip 11 (or newer) or 7-zip which will allow you to open the file. You can access these programs from the following links:
WinZip – http://www.winzip.com/prod_down.htm (Choose ‘Download’ > ‘Get WinZip Free’)
7-zip – http://www.7-zip.org/


I will be posting a list of online gambling addresses next week.

FBAR Changes for 2014

Tuesday, January 7th, 2014

There have been some changes made by by FINCEN (the Financial Crimes Enforcement Network) for the Report of Foreign Bank and Financial Accounts (FBAR) for 2014. While overall these are minor, they will impact everyone who files an FBAR.

First, Form TD F 90-22.1 is no more. The FBAR has a new form number, Form 114.

Second, as of last July the FBAR must be electronically filed. The good news is that as of last October, your tax accountant can file the form for you as long as you complete Form 114a.

Third, as of January 1st, you don’t have to register to efile an FBAR. You can now just go the BSA efile website, follow the instructions and file the form. Do note that past experience is that the BSA efile website works well in Internet Explorer but might not work in Firefox or Chrome.

And most importantly, the definition of who must file has changed slightly. The new rule effective November 23, 2013, states:

United States persons are required to file an FBAR if:

The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported. [emphasis added]

It used to be that the rule was take the maximum value of each account, sum the maximums, and compare the sum to $10,000. Now, the rule (except for dollar amounts) matches that of FATCA (except for dollar amounts) in that it looks at your value in an account on one day.

Some things haven’t changed, though. The FBAR is due on June 30th and there are no extensions. If you have a foreign financial account you must check a box at the bottom of Schedule B even if you don’t need to file the FBAR. There’s a second box you must check if you need to file an FBAR, and you have to list the countries you have foreign accounts in (if you must file an FBAR) on your tax return. Thus, if you do need to file the FBAR, get your information together as your tax professional will need it in order to file your return.

It Only Took Six Years to Get an Answer….

Sunday, November 17th, 2013

I currently have an audit reconsideration case that’s been on hold for eighteen months. I guess I have nothing to complain about, though. One unlucky attorney waited over six years to get an answer from the Financial Crimes Enforcement Network (FINCEN).

On October 22, 2007, an attorney asked, “…[W]hether a payment mechanism based on payable-through drafts that the Company offers to its commercial customers (the “customers”) makes the Company a money transmitter under the regulations.” On November 13, 2013, FINCEN said yes.

There is a bit more to this case than what’s noted above. FINCEN issued regulations in July 2011 that impacts the specific facts and circumstances of the matter. And I’m not really that concerned with this issue (it has no direct impact on my clients).

What does bother me is that there’s no obvious reason why it took FINCEN six years to respond. Of course, my client waiting for his audit reconsideration is hoping that it won’t be another 54 months for his case to be reviewed.