Posts Tagged ‘FBAR’

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.

Online Gambling Addresses (Updated for 2014)

Sunday, June 22nd, 2014

With the United States v. Hom decision, we must again file an FBAR for foreign online gambling sites. An FBAR (Form 114) is required if your aggregate balance exceeds $10,000 at any time during the year.

There’s a problem, though. Most of these entities don’t broadcast their addresses. Some individuals sent email inquiries to one of these gambling sites and received politely worded responses (or not so politely worded) that said that it’s none of your business.

Well, not fully completing the Form 114 can subject you to a substantial penalty. I’ve been compiling a list of the addresses of the online gambling sites. It’s presented below.

Note: This list is presented for informational purposes only. It is believed accurate as of June 22, 2014. However, I do not take responsibility for your use of this list or for the accuracy of any of the addresses presented on the list.

The list is in the cut text below.

If anyone has additions to the list feel free to email them to me.

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.

More on the Hom Decision

Monday, June 9th, 2014

Jack Townsend of the Federal Tax Crimes Blog has a post on United States v. Hom today. In his post, he notes that Mr. Hom represented himself. Indeed, the court is still looking for a pro bono counsel to represent Mr. Hom:

Defendant John Hom is not indigent and therefore does not qualify for appointment of pro bono counsel with the Court’s federal pro bono project. This tax action, however, involves novel questions of law regarding the interpretation of the Bank Secrecy Act and related regulations. Accordingly, the Court seeks counsel to volunteer to represent defendant on a pro bono basis for the remainder of this action. Pro bono counsel will be allowed to re-brief the pending summary judgment motion, which is currently held under submission. In addition, a case management schedule has not yet been set.

If any counsel is willing to volunteer to represent defendant, please email the undersigned judge’s courtroom deputy, Dawn Toland, at whacrd@cand.uscourts.gov by JUNE 12, 2014.

While Mr. Townsend notes that the Court applied the duck test, I remain unconvinced that the Court got this right. It did if you had to decide that all three foreign accounts in this case were foreign financial accounts or none were; however, if the Court could look at each individually the Court likely would have come to a different conclusion.

In any case, as of today we’re stuck with this decision. And no, I haven’t heard from the FBAR group at the IRS yet.

Back to the Past: Poker Sites and FBARs. Poker Sites Are Again Reportable Foreign Financial Accounts

Thursday, June 5th, 2014

Back in the past, I asked the FBAR group at the IRS whether or not poker sites needed to be reported. In January 2009, they told me they did have to be reported. In prior years, the FBAR group said they did not have to. Thus, FBARs (then, Form TD F 90-22.1) were sent to FINCEN with poker accounts.

Come early 2011, FINCEN issued new regulations. These regulations made it clear at the time that poker accounts would no longer be considered reportable foreign financial accounts. However, yesterday a judge disagreed.

In United States v. Hom defendant Hom was charged with violating the Bank Secrecy Act for not reporting three accounts at FirePay, PokerStars, and Party Poker.

In the case, the Court decided:

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).

The biggest problem that I see for the defendant is that he had an account at FirePay. FirePay was a United Kingdom-based third-party payment processor similar to Skrill (Moneybookers) and Neteller. FirePay was absolutely a foreign financial account: It issued credit cards, debit cards, and had functions that almost anyone would say are akin to what banks offer.

In this case, the defendant argued that all of his accounts were not foreign financial institutions. He did not separate out the poker sites from the third-party payment processor in his arguments. He was almost certainly doomed on the FirePay account. Still, the Court ruled that PokerStars and Party Poker were banks. What does this mean for individuals who have poker accounts?

1. As of now, plan on reporting these accounts for both FBAR (Form 114) and Form 8938 purposes. When in doubt, report is a good rule of thumb.

2. Do poker accounts need to be reported? As of now, yes.

3. Do prior year FBARs need to be filed and/or amended for poker accounts? This is unclear, but the answer is probably so. The statute of limitations on FBARs is six years from the due date. Given the FBAR is due on June 30th of the year following, the statute is about to run out on 2008. (In any case, for calendar years 2008 and 2009 poker sites were considered foreign financial accounts.) However, I would think that 2010 and 2011 FBARs would need to be filed or amended.

4. Do tax returns need to be amended to note the presence of foreign financial accounts if you have an FBAR filing requirement for poker accounts? Almost certainly they do for any tax years open (2011 – 2013).

5. Also note that tax returns may need to be amended just by the presence of a foreign financial account. The IRS now asks on Schedule B whether you have a foreign financial account. Anyone with money at PokerStars in 2011 would need to answer yes.

I have sent questions to the IRS on this issue. (The FBAR group at the IRS is one of the few groups that accepts emails.) I have asked whether they want such accounts to be reported; whether back FBARs/amended FBARs should be filed; and whether tax returns should be amended. I will both post on the response I receive and update this post when I do receive the response.


A few other things to note about the decision. This is not a precedential decision; it is a decision of a District Court Judge. A Court of Appeals has not ruled on this. The defendant lumped an account that was clearly a foreign financial account with accounts that might not be. The Court looked at them in toto rather than individually. I suspect that if Mr. Hom appeals this decision, he will also argue that the poker accounts should be looked at differently than the third-party payment processor.

I am troubled by the Department of Justice looking at poker accounts as a foreign financial account. Still, there are some other issues regarding this decision that are unclear. FBAR charges are rarely brought in isolation. I don’t know what caused these charges to be brought.

In the end, this is not a good decision for poker players or tax accountants who service the poker world. Lots more useless paper will end up being generated as a result of this decision. (Well, electrons as FBARs now must be electronically filed.) Still, the old adage of better safe than sorry holds. As of today, reporting poker sites as foreign financial accounts is back on.

The FBAR Has Changed

Thursday, October 3rd, 2013

Tax professionals can now file FBARs (Form TD F 90-22.1) for clients. We have to have our client sign Form 114a authorizing the preparer to efile the FBAR. Today, when I went to file an FBAR for a client, I was greeted with a very colorful new FBAR. The form also has a new number: FINCEN Form 114.

The form has seven pages (groan). The data-entry portions are the same; however, there is now a pull-down menu on page 1 for the reason for late filing (where applicable):

Page 1 of New FBAR

Not shown on the pull-down menu is “Other Explanation.” You can then enter a lengthy explanation if need be.

There’s now also a place for tax professionals to enter their information when we file the form for clients; this is on page 7 of the form:

Page 7 of New FBAR

Unfortunately, many of the entry boxes uses pull-downs which don’t allow you to just type, say, “NV” for Nevada. Instead, you type an N (or an O) and then move the slider bar down or up to select Nevada. This is definitely annoying when you enter countries for foreign financial accounts.

FINCEN has said that they are working with the IRS and eventually we’ll be able to file FBARs through tax software. I’m likely going to take the over on anyone’s bets for when that will happen….

I Haven’t Filed my FBAR. What Should I Do?

Sunday, July 7th, 2013

It’s July 7th, and you suddenly realize that you haven’t filed your FBAR. You print it up, and have a letter of explanation, but:

  • You can’t file an FBAR using paper (it must be electronically filed using the BSA efile system); and
  • You need to attach a letter of explanation but the BSA efile system doesn’t allow that.

Jack Townsend of the Federal Tax Crimes Blog has a post that is directly on point as to what to do. You can efile, keep the back-up documentation (the letter of explanation), and wait for the IRS to contact you; or you can call the FINCEN BSA resource center (800-949-2732) and ask for an exemption from efiling and mail the form (once the exemption is granted). You would then attach the letter of explanation to the FBAR.

In any case, if you forgot your FBAR filing take care of this immediately. Penalties on the FBAR are draconian; this is not something to put off until tomorrow.

Mandatory efiling of FBARs Effective July 1st

Friday, June 28th, 2013

Effective July 1st, all FBARs–Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts–must be efiled. You must use the BSA efile system to efile FBARs. This includes amended FBARs.

(One exception would appear to be individuals coming into compliance within the Offshore Voluntary Disclosure Initiative or the Streamlined Disclosure; those required FBARs to be submitted on paper. Of course, this is the government making rules, so anyone looking into those programs at this date should likely get their tax professional to find out the answer. I sent an inquiry to the IRS but haven’t received a response yet. I’ll update this post when the IRS responds.)

One other current rule about the FBAR: Tax professionals currently cannot file an FBAR for clients; it’s against the rules. FINCEN (the Financial Crimes Enforcement Network), the government agency that handles FBARs, is looking into allowing 2013 FBARs (filed in 2014) to be filed by tax professionals. Until then, we can create the information that you need for the FBAR, but we cannot file it for you.

One piece of good news requiring the BSA efile system: It appears that it now works with most Internet browsers.

FBAR Deadline Is Now

Monday, June 24th, 2013

Almost every tax form uses a postmark deadline. For example, if you mail your tax return on April 15th (using certified mail, return receipt requested, of course), and the post office sends your return to Fresno via Fargo so it doesn’t get there for two weeks, your return is still timely filed. It was mailed by the deadline. Unfortunately, for every rule there’s an exception. The FBAR is where the exception can be very, very nasty.

What’s an FBAR? The FBAR is shorthand language for the Report of Foreign Bank and Financial Accounts (Form TD F 90-22.1). If you have $10,000 in one or more foreign financial accounts, you must file an FBAR. This is determined by taking the maximum balance of each account at any time during 2012, summing the maximums, and comparing that sum to $10,000. If you reach that $10,000 number, you must file an FBAR.

Some examples of foreign financial accounts include bank accounts, securities accounts, and third-party payment accounts (e.g. Moneybookers/Skrill and Neteller). Online gambling sites are not considered foreign financial accounts.

You have two choices as to completing the FBAR. You can electronically file it using the BSA efile system or you can print the form and mail it to the Department of the Treasury. This form needs to be received by June 30th (for reporting 2012), and there are no extensions.

Since June 30th falls on a Sunday, the deadline is really Monday, July 1st, right? Wrong. This deadline isn’t extended, so if it is received at the PO Box in Detroit where FBARs are sent on Saturday, June 29th, it would likely be timely filed. It definitely will be considered timely filed if it is received on Friday, June 28th. That makes the true mailing deadline tomorrow, June 25th.

You can send it via FedEx, DHL, or UPS overnight; that would give you until Thursday, June 27th.

The good news is that many of my clients who file the FBAR have been able to use the BSA system without any problems this year. It appears that the system now works in most browsers (last year, it only worked in Internet Explorer). You get a receipt when you efile (which you should save, of course).

The penalties for willfully not filing the FBAR start at $100,000 per account or half the value of the account, whichever is greater. So if you have an FBAR filing requirement, this is something to take care of now. The form is not particularly odious, but the penalties are.

Kudos to Kenneth Ryskamp

Saturday, April 27th, 2013

Who is Kenneth Ryskamp? He’s a Senior Judge in the United States District Court for the Southern District of Florida. Judge Ryskamp was born in 1932, and has been a US District Court Judge since 1986 (and a Senior Judge since 2000). Why am I noting Judge Ryskamp? Because of a sentence he imposed on Thursday.

Mary Curran of Palm Beach, Florida inherited Swiss bank accounts from her husband. Those accounts had not been reported (and likely the interest not reported on tax returns). Her attorney, Roy Black, tried to get Mrs. Curran into the Offshore Voluntary Disclosure Program (OVDP) but her name had already been given to the IRS. She paid a large fine ($26 million); the Department of Justice brought criminal charges. She pleaded guilty to two false tax return charges. Judge Ryskamp wondered why:

Based on these facts, did it ever occur to the government to dismiss these charges. Instead, the government decided it had to make a felon out of this woman?

Judge Ryskamp gave Mrs. Curran one year of probation. Given Mrs. Curran could have faced six years at ClubFed, that sentence in itself was a huge win. But she got more good news a few moments later: The judge immediately revoked it! Her probation lasted all of five seconds. Judge Ryskamp noted:

This is really a tragic situation…It seems to me the government should have used a little more discretion.

The judge also suggested that Mrs. Curran request a presidential pardon, which he would endorse.

As Joe Kristan noted, the government goes after the accidental offenders with shotguns while slapping the wrists of some big-time offenders. Perhaps the IRS and DOJ will use some discretion in the future…but that’s probably asking too much.

News Coverage: Palm Beach Daily News, ABA Journal