The foreign bank and financial account reporting rules require anyone with signature authority over a reportable foreign bank account to complete and file Form 114. Many times, an entity that has a reportable foreign bank account will have an employee that has signature authority over the foreign account. Such employees are required to submit their own foreign bank account report, Form 114, to report the signature authority, if such authority existed at any time during the tax year.
A client recently raised a question regarding the reporting requirements applicable to an employee whose signature authority is terminated during the middle of a tax year, especially if the employee has left the employer. For example, if the employee is terminated on May 31, 2014, would the employee be required to report the highest balance during the calendar year 2014 or only the highest balance of the account through the date of termination of employment?
In order to get clarification on this issue, we called the IRS Bank Secrecy Act Helpline in Detroit (866-270-0733). The agent confirmed that the employee is only required to report the highest balance during the period of time that he or she had the signature authority. In the example above, the employee would only be required to report the highest balance through May 31, 2014.
