Signatory Authority over Foreign Bank Accounts

Signatory Authority over Foreign Bank Accounts

Do I Report Signatory Authority over Foreign Bank Accounts

Signatory Authority over Foreign Bank Accounts: The IRS And FinCEN (Financial Crimes Enforcement Network) have taken an aggressive strategy on all matters involving foreign accounts compliance. One of the key component for U.S. Persons is to ensure that they are in FBAR and FATCA compliance. The failure to remain (or to get into) compliance before the government launches and audit, exam or investigation may lead to offshore fines and penalties. This includes signatory authority over foreign bank accounts.

Common Examples of Signature Authority

Here are two typical examples involving signatory authority:

  1. Example 1: David resides in the United States but his elderly parents still reside in Singapore. In order to make it easier for David to access funds for his parents, David’s parents placed David’s name on the bank accounts. That way, if either of the elderly parents develop Alzheimer’s or other debilitating disease or handicap, David will have the authority to make withdrawals on behalf of the parents from their bank accounts. Aside from the “signatory authority” David has no relation to the accounts as none of the money is his.
  1. Example 2: Jennifer and her parents reside in the United States but Jennifer’s parents have investments around the globe and therefore placed Jennifer as a beneficiary or nominee on the foreign accounts. In accordance with most foreign laws, Jennifer may be named on the account, but she does not have any access to the money other than the fact that if an emergency happens, she is identified as somebody who can enter the account and make deposits and withdrawals. Aside from the “signatory authority” Jennifer has no relation to the accounts as none of the money is hers.

In example number one, the taxpayer should definitely report the signatory authority since it is clear that the taxpayer does have signatory authority.

In the second example, it can get more confusing because in some countries being identified as a nominee is equivalent to being a beneficiary – and merely being a beneficiary does not require you to complete the forms listed below because technically you do not have signatory authority. This will also depend on how those terms are defined in the foreign country and how they would be evaluated by the IRS in the United States if an issue is to rise.

Schedule B & Signatory Authority of Foreign Bank Accounts

Schedule B is a form that is followed along with a tax return. Generally, the schedule B is basically a form that is required when a taxpayer has domestic interest and dividend earnings that exceed $1500. In order to make life more confusing for taxpayers with international tax issues, schedule B is also required when individuals have foreign accounts. With the schedule B, foreign account also includes signatory authority over the foreign account.

Specifically, schedule B asks:

“At any time during 2014, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?” As a result, in either example identified above the individual should identify the accounts that they have signatory authority over.

Schedule B defines signatory authority as:

“Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank or other financial institution that maintains the financial account. See the FinCEN Form 114 instructions for exceptions. Do not consider the exceptions relating to signature authority in answering Question 1 on line 7a.”

FBAR Signatory Authority of Foreign Bank Accounts

The FBAR (Report of Foreign Bank and Financial Accounts) is a form that is filed directly with the Department of Treasury. It is required to be filed by any individual who has more than $10,000 in annual aggregate total of their foreign accounts. When it comes to the FBAR, the Department of the Treasury is clear that if a person has signatory authority over an account, they are required to still complete the FBAR.

The FBAR is an informational document, which has become more important ever since the enforcement of FATCA. In fact, the FBAR form itself is broken down into different categories and one of the categories is for individuals who only have signatory authority for related authority over a foreign account.

There are very stiff penalties for failing to file the FBAR so even if you are on the fence as to whether your overseas authority is actual signatory authority, you should highly consider simply following form to avoid any future issue with a foreign bank or foreign financial institution reporting you to the IRS in accordance with FATCA.

Form 8938 Signatory Authority of Foreign Bank Accounts

The 8938 is a form similar to the FBAR, except that the 8938 form is filed directly with the Internal Revenue Service and is filed with you file your tax return. Like the FBAR, there are very stiff penalties for a person’s failure to file the 8938.

Luckily, if all you do have a signatory authority and not ownership of the account and generally are not required to file the 8938 form. Moreover, if you are required to file the form there are much higher threshold requirements for all of its value ownership then versus the FBAR – $50,000/$75,000 for individuals and $100,000/ $150,000 per taxpayer to file married filing jointly.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.

Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.

*Please beware of copycat tax and law firms misleading the public about their credentials and experience.

Less than 1% of Tax Attorneys Nationwide Are Certified Specialists

Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.

Recent Golding & Golding Case Highlights

  • We represented a client in an 8-figure disclosure that spanned 7 countries.
  • We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
  • We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
  • We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
  • We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.

How to Hire Experienced Offshore Counsel?

Generally, experienced attorneys in this field will have the following credentials/experience:

  • Board Certified Tax Law Specialist credential
  • Master’s of Tax Law (LL.M.)
  • 20-years experience as a practicing attorney
  • Extensive litigation, high-stakes audit and trial experience
  • Dually Licensed as an EA (Enrolled Agent) or CPA

Interested in Learning More about Golding & Golding?

No matter where in the world you reside, our international tax team can get you IRS offshore compliant. 

Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.