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While we're on the subject of Schedule B, if you were required to complete Part I or II of Schedule B because you had more than $1,500 in interest payments or ordinary dividend distributions in 2011, you must also complete Part III. Also, every taxpayer who had a foreign account or was a beneficiary, grantor, or transferor to a foreign trust must complete Part III.
Part III asks you to answer "yes" or "no" to two questions. The first question is: "Did you, at any time during the tax year, have an interest in or signature or other authority over a bank account, securities account, or other financial account in a foreign country?" However, do not check the "yes" box if the combined value of the accounts was $10,000 or less during the year; if the accounts were with a U.S. military banking facility; or if you are an officer or employee of a commercial bank supervised by a U.S. agency, or of a domestic corporation listed on a national exchange or with assets of more than $1 million and with at least 500 shareholders, and you had no personal interest in the account.
If these exceptions don't apply, check the "yes" box if you own more than half of the stock in a company that owns one or more foreign bank accounts, or you directly own or have an interest in such an account. This does not include foreign securities held in a U.S. securities account.
If you checked the "yes" box, you must write the name of the country or countries on Line 7b, and also file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department by June 30, 2012. This is not a tax form, so don't attach it to your tax return. You can get a copy of this form by calling 1-800-TAX-FORM, or you can download it from the IRS website. Regardless of whether you are required to file Form TD F 90-22.1 (FBAR), you may be required to file Form 8938, Statement of Specified Foreign Financial Assets, with your income tax return. Failure to file Form 8938 may result in penalties and extension of the statute of limitations. See www.irs.gov/form8938 for more information.
The second question is, did you receive a distribution from, or were you the grantor of or transferor to, a foreign trust? You may have to file IRS Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. If you have foreign investments accounts and trusts, we strongly urge you to consult a tax professional who is experienced in these compliance requirements. The penalties for failure to comply with the various filing and disclosure requirements are among the stiffest in the tax code. If you are required to file Form TD F 90-22.1 but do not properly do so, you may have to pay a civil penalty up to $10,000. A person who willfully fails to report an account or provide account identifying information may be subject to a civil penalty equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. Willful violations may also be subject to criminal penalties. This is not an area for the do-it-yourselfer.
If you had a foreign investment account, it's likely that you paid some foreign tax on it, and you may be entitled to a foreign tax credit.