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Tax Talk with George Saenz

Ask the tax adviser

How the government tracks foreign bank accounts

Dear Tax Talk:
Due to an oversight, I incorrectly stated "no" to the question of holding a foreign bank account on last year's return. This resulted in me not filing the TD F 90-22.1.

How do I correct it? Will I have to file an amended return? Isn't it correct that my tax won't change because the foreign bank account interest reporting is actually separate from 1040? Or should I file just a separate TD F 90-22.1 for last year, along with this year's filing?
Thank you in advance.
Santosh

Dear Santosh:
This is a grave and unforgivable tax sin; I don't know how you can sleep at night. Your thoughtful inquiry and sleepless nights will probably work to keep you out of jail. While it is not illegal to have a foreign bank account, the Treasury Department, of which the Internal Revenue Service is a branch, requires taxpayers to report certain information about these accounts.

Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (you would think they could come up with a simpler name) is used by U.S. residents, citizens and domestic corporations to report information about foreign bank or brokerage accounts.

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U.S. taxpayers are obligated to report these accounts on this separate form if they have a financial interest or signature authority accounts with a value greater than $10,000. The separate form must be filed by June 30 of each year. There are penalties for failing to file the report, but in practice I have not seen the Treasury Department assess these penalties for late filing.

Filers are required to report earnings and gains and losses on these accounts on their individual income tax returns, such as on Schedules B and D. In addition, Line 7A of Schedule B requires you to disclose the account. If you forgot to report the account earnings on your Form 1040 for 2000 or did not disclose the account on Schedule B, you should prepare an amended tax return.

-- Posted: April 5, 2002

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See Also
Foreign taxes can help cut U.S. IRS bill
Form 1040-X gives taxpayers a second chance

IRS notices: what they mean, what to do

More tax adviser stories
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