TheAmerican | In Italia
Published January 31, 2017
This is of course not the case for Americans or those with dual U.S.-Italian citizenship who reside in Italy. For them, IRS tax traps lurk just around many corners. American citizens are also subject to U.S. tax laws, which means an annual filing of a U.S. income tax return and a Report of Foreign Bank and Financial Account (FBAR). Some individuals are also required to file state returns.
Though many Americans who live abroad are now aware of their U.S. tax responsibilities, quite a number are still just finding out. The U.S. tax reporting landscape shifts a bit with each new tax season, and since the 2016 tax season is upon us, it's important to highlight a change in the deadline for the filing of FBAR.
For the uninitiated the Bank Secrecy Act of 1970 requires FBAR reporting from every U.S. citizen "having a financial interest in, or signature or other authority over, a bank, securities, or other financial account in a foreign country" if the aggregate maximum values in that person’s foreign accounts exceed $10,000 at any time during the calendar year.
A financial account includes but is not limited to securities, brokerage, savings, demand, checking, deposit, time deposit, or other accounts maintained with a financial institution (or with another person who is performing the services of a financial institution). Commodity futures or options account as well as insurance policies with a cash value (such as a whole life insurance policy) are also included. So are annuity policies with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
Until 2017, the FBAR filing deadline had always been June 30. No extensions were allowed. The date was awkward given the April 15 filing date for U.S. tax returns (June 15 for those living outside the US). A variety of extensions have always been available for the filing of income tax returns, but not for filing FBARs.
In practice, the different deadlines and separate rules on filing extensions elicited complaints from taxpayers, advocate groups and tax professionals. The tax year seemed never-ending, a problem magnified for U.S. citizens residing in Italy who are also required to file Italian tax returns under a separate set set of deadlines.
Now, with the passage of Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (Surface Act), the FBAR due date has been changed to April 15, aligning it with the U.S. tax calendar.
More importantly, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the agency with which FBARs are filed, announced that it would grant a six-month extension for filing an FBAR to October 15 every year. The extension will be automatic, eliminating the need to make a formal request.
This change may be particularly welcome for American citizens who reside in Italy, where local tax returns are usually not filed until September. Those who wish to meet the earlier April 15 FBAR deadline are free to do so. But others can now gather their financial documentation and tackle their tax responsibilities in a more tempered and logical way.