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News | 06.29.09

IRS Sets September 23, 2009 Deadline To File Reports on Offshore Hedge Fund Accounts.

An obligation to file a Report of Foreign Bank and Financial Accounts ("FBAR") applies to any United States person who has a financial interest in or signature authority over any financial accounts in a foreign country, if the aggregate value of these financial accounts exceed $10,000 at any time during the calendar year. The FBAR is filed on IRS Form TD F 90-22.1. While in past years the FBAR has generally been filed by U.S. persons with foreign bank and brokerage accounts, it generally was not filed by U.S. persons with interests in offshore investment funds. However, on a June 12, 2009 teleconference hosted by the American Bar Association and the American Institute of Certified Accountants, IRS panelists on the call suggested that the FBAR filing requirement also applies to an interest in a foreign hedge fund that served a function similar to a mutual fund. While no specific reference was made to foreign private equity funds or to other types of foreign investment funds, it is possible that the IRS views interests in these funds as subject to the FBAR filing requirement as well.

On June 24, 2009, the IRS issued written guidance providing certain taxpayers with an extension of time to file the FBAR for 2008. Specifically, the FBAR filing deadline for 2008 is extended until September 23, 2009 for U.S. persons who have reported and paid tax on all of their 2008 taxable income but only recently learned of their FBAR filing obligation and have insufficient time to gather the necessary information to complete the FBAR. Furthermore, delinquent FBAR reports for years prior to 2008 can be filed by certain U.S. persons by September 23, 2009 without penalty.

In light of the substantial penalties for failure to file FBAR reports, investors and managers of offshore funds should give serious consideration to making a timely FBAR filing.

If you have any questions relating to the FBAR filing requirements, please contact your primary attorney at Morrison Cohen LLP or any of the following:

Isaac Grossman - (212) 735-8735

Michael Weinstein - (212) 735-8746

Michael Kearney - (212) 735-8649

Circular 230 Disclaimer: Please note that any tax advice contained in this communication is not intended or written to be used, and it cannot be used, for the purpose of (i) avoiding penalties that may be imposed on you or any taxpayer by the Internal Revenue Service or other tax authorities or (ii) promoting, marketing, or recommending to another party a partnership or other entity, investment plan or arrangement.
 

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