FBAR Panic Was All A False Alarm
Limited partners and individual investors in private equity funds and hedge funds may remember last year's FBAR scare: IRS officials created confusion as to whether investors in offshore private equity and hedge funds would have to file a Report of Foreign Bank and Financial Accounts (FBAR) for tax purposes. Last week the Treasury backed away from those statements, allowing investors to breathe a sigh of relief. I spoke with Seth Entin, a tax lawyer at Greenberg Traurig, on the topic. peHUB: So what exactly is FBAR? Entin: It's a one or two page disclosure form administered by the IRS. It's used to disclose if you have an ownership in an offshore financial account. It's designed not just for tax purposes but also to detect money laundering and other crimes as well. Before the IRS said everyone needed to file one, how was it used? People used to invest in foreign hedge and PE funds and didn't think they had to file these. So most people who invested in foreign funds never filed it. Then a few statements were made by IRS officials that said if a US investor owns an interest in a foreign PE or hedge fund, you have to put it on an FBAR, not only for this year, but for all prior years.
