If you or your Self Directed IRA LLC or Solo 401K Plan has a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The Form must be filed by June 30th.
The FBAR is required because foreign financial institutions may not be subject to the same reporting requirements as domestic financial institutions.
United States persons are required to file an FBAR if:
The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported. Exceptions to the FBAR reporting requirements can be found in the FBAR Instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
- Certain foreign financial accounts jointly owned by spouses;
- United States persons included in a consolidated FBAR;
- Correspondent/nostro accounts;
- Foreign financial accounts owned by a governmental entity;
- Foreign financial accounts owned by an international financial institution;
- IRA owners and beneficiaries;
- Participants in and beneficiaries of tax-qualified retirement plans;
- Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
- Trust beneficiaries; and
- Foreign financial accounts maintained on a United States military banking facility.
You will notice that there is an exception for IRA owners and beneficiaries as well as participants and beneficiaries of a qualified retirement plan such as a Solo 401K Plan.
In the case of a custodian controlled Self-Directed IRA, it would appear that the IRA holder would not be required to file the form. The same can be said about a Solo 401(k) Plan since the account would held in the name of the IRA or 401(k) Plan.
However, in the case of a Self-Directed IRA LLC, the LLC and not the IRA custodian would be the owner of the foreign bank account. Even though the IRA will be the member of the LLC, a passthrough entity, an argument can be made that the exception to filing the form would not apply since the LLC and not the IRA owns the foreign account. Plus, the LLC manager, which in most cases will be the IRA holder, will have signatory authority over the account. Most practitioners take the position that if the foreign bank account is held in the name of the LLC, even though the member if an IRA, the Form TD F 90-22.1 should be completed.