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     A United States person with a greater than 50% interest in a foreign financial account must annually file FinCEN Form 114, entitled “Report of Foreign Bank and Financial Accounts” (“FBAR”) if the aggregate maximum value of the foreign financial accounts exceeds $10,000 at any time during a calendar year.  An individual who has “signature authority” over  a foreign financial account must also file an FBAR.

     In the recently issued “Reference Guide on the Report of Foreign Bank and Financial Accounts (FBAR),” the Internal Revenue Service defines “signature authority” as “the authority of an individual . . . to control the disposition of assets held in a foreign financial account by direct communication . . . to the bank or other financial institution that maintains the financial account.”

     The IRS then provided the following example of signature authority:

Megan, a United States resident, has a power of attorney on her elderly parents’ accounts in Canada, but she has never exercised the power of attorney.  Megan is required to file an FBAR if the power of attorney gives her signature authority over the financial accounts.  Whether or not the authority is ever exercised is irrelevant to the FBAR filing requirement.

     In light of the above example, an agent who has signature authority on any foreign account owned by a principal as described above must be diligent and file all required FBARs.  Chances are, this requirement would not occur to most agents or indeed, to the CPA or attorney helping with satisfying tax compliance requirements.

-  Barry Engel and Eric Kaplan

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