Reporting of Foreign Bank and Financial Accounts

We are writing to inform you of the continued reporting requirements for U.S. Persons using Form TD F 90-22.1 – Report of Foreign Bank and Financial Accounts, and the new reporting requirements for Individuals using IRS Form 8938 – Statement of Specified Foreign Financial Assets for the 2011 Tax Year.

Form TD F 90-22.1 (FBAR) – Report of Foreign Bank and Financial Accounts

United States Persons are required to report their worldwide income, that is, income from both U.S. and foreign sources. In addition, taxpayers who have an interest in, or signature or other authority over, a financial account in a foreign country – such as a bank account, securities account, or other financial account – are required to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), if the aggregate value of all such financial accounts exceeds $10,000 at any time during the calendar year.

The FBAR is not filed with your tax return. Instead, it is filed with the Department of the Treasury in Detroit, Michigan, no later than June 30 of the year following calendar year reported.

For purposes of Form TD F 90-22.1, a “United States Person” means:

  -U.S. Citizen -U.S. Resident

  -Entities, including, but not limited to Corporations, Partnerships, and Limited Liability Companies, created or organized in or under the laws of the U.S.

  -Trusts or Estates formed under U.S. Law

Failure to report income in foreign bank accounts, or to file the FBAR, carries serious consequences, including large monetary penalties and, in some cases, criminal penalties.

Form 8938 – Statement of Specified Foreign Financial Assets

Specified Individuals are required to report, on Form 8938, the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount.

For purposes of Form 8938- “Specified Individuals” includes:

  -U.S. Citizen

  -A Resident Alien of the U.S. for any part of the year

  -A Nonresident Alien who makes an election to be treated as a Resident Alien for purposes of filing a joint income tax return

  -A Nonresident Alien who is a bona fide resident of American Samoa or Puerto Rico.

Please note that future IRS Regulations may expand this list to include domestic entities.

“Specified Foreign Financial Assets” includes:

  -Any financial account maintained by a foreign financial institution

  -Any of the following assets that are not held in an account maintained by a financial institution:

     -Any stock or security issued by a person other than a U.S. person

     -Any financial instrument or contract held for investment that has an issuer or counterparty that is other than a U.S. person; and

     -Any interest in a foreign entity

Applicable Dollar Thresholds for the 2011 Tax Year:

Unmarried or Married filing Separate living in the U.S.

More than $50,000 on the last day of the tax year or more than $100,000 at any time during the tax year.

Married filing Joint living in the U.S.

More than $100,000 on the last day of the tax year or more than $200,000 at any time during the tax year.

Unmarried living abroad

More than $200,000 on the last day of the tax year or more than $400,000 at any time during the tax year.

Married filing Joint living abroad

More than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Form 8638 must be attached to your Individual Tax Return.

Failure to file Form 8638 when required carries large monetary penalties.

Please note that the FBAR and Form 8638 are not substitutes for each other. Each form must be filed as determined under the applicable filing requirements.

If you have foreign bank accounts and/or other foreign financial assets and are unsure whether you are required to file the FBAR and/or Form 8638, we would be happy to review your portfolio and advise you.