While it is certainly legal for U.S. persons (including entities) to have accounts outside the U.S. and there are many everyday situations where it makes sense, it is critical to disclose the accounts on a U.S. income tax return and, when applicable, file the Report of Foreign Bank and Financial Accounts (the “FBAR”). Willful failure to file the FBAR can result in substantial civil and criminal penalties, including up to 5 years in prison or both, and the total penalties imposed could far exceed the balance in the foreign financial account.

For calendar year 2011, the FBAR must be received by the Treasury Department no later than June 30, 2012 (the postbox rule does not apply to FBARs). However, IRS has issued several notices that could extend this deadline for a limited number of United States persons.

For those who still have not complied with this requirement relating to prior years, the IRS has initiated an open ended extension of the 2011 Offshore Voluntary Disclosure Initiative, which ended on September 9, 2011.