IRS Provides Limited Extension for Foreign Financial Account Reporting

June 26, 2009

On June 24, the IRS announced that it was providing limited relief to “U.S. persons” who are required to file Form TD F 90-22.1 to report a financial interest in, or signature authority over, a foreign financial account by June 30, 2009. See our previous memos on this subject, titled Foreign Financial Account Reports Due June 30 and Update Regarding Foreign Financial Account Reports Due June 30.

In a Q&A posted on the IRS website, the IRS provided that U.S. persons who “recently learned” of their filing obligation and have insufficient time to gather the information necessary to properly comply with the filing requirements by June 30 can file Form TD F 90-22.1 by September 23, 2009 without penalty. This relief is limited to taxpayers who timely report and pay tax on all their 2008 taxable income. Special instructions apply to these filings. Since the scope of this relief is unclear, we recommend that persons who can file Form TD F 90-22.1 by June 30, 2009 should do so. We remind you that Form TD F 90-22.1 must be received by the IRS (not just postmarked) by June 30 in order to be timely filed.

The IRS has reiterated over the past two weeks that, as described in our June 3 memo, it views any offshore private investment fund or mutual fund as a “foreign financial account”. Therefore, any U.S. person who had an investment in a private investment fund or mutual fund organized in a non-U.S. jurisdiction at any time during the 2008 calendar year should file Form TD F 90-22.1 reporting such investment as a foreign financial account.

In published reports, IRS officials have claimed that the treatment of a private investment fund as a foreign financial account is not new and therefore investors in offshore private funds should file Form TD F 90-22.1 for all years dating back to 2003 by September 23, 2009. We believe the IRS interpretation is new and we are seeking further clarification as to the official IRS position with respect to filings for past years for such investors. We will keep you updated on the status of these requirements.

In view of the IRS position on the treatment of offshore investment funds as “foreign financial accounts,” it appears that filings with respect to these funds may also need to be made by U.S. investment managers of these funds and the individuals related to such managers who have “signature authority” with respect to the disposition of the assets of these funds. Given the uncertainty and lack of definitive guidance on this issue, we are generally recommending that investment managers and individuals with such signature authority make these filings.


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