Moving overseas can be such an upheaval and a stress. For many there is so much to organize with immigration, transporting your belongings and making sure each family member gets from A to B in one piece.
American Citizens and Green Card holders living overseas are required to file their income tax return each year by June 15th excluding extensions.
But what about other reporting requirements?
Certain information returns are also required to be filed by a US taxpayer. For example, the Report of Foreign Bank and Financial Accounts (FBAR).
Who Needs to File an FBAR?
Any US Citizen or Resident who owns or has signatory authority over a foreign account falls under the Bank Secrecy Act and potentially needs to prepare and file an FBAR.
An FBAR is due to be filed by a US person by April 15th excluding extensions, each year that the aggregate maximum value of all foreign accounts exceed $10,000.
When this threshold is breached each foreign account must be reported regardless of balance. That means even accounts with a zero balance need to be reported.
This rule not only applies to foreign bank accounts but many types of foreign accounts.
A few are named below:
- Checking Accounts
- Savings Accounts
- Pension funds (employer and non-employer sponsored)
- Brokerage accounts
- Cryptocurrency accounts
- Insurance policies with a cash value.
There are exclusions to this rule for certain foreign accounts.
Click here to discuss with an experienced adviser whether your foreign account is excluded from filing an FBAR.
Is Filing Really Such a Big Deal?
Actually yes it is.
Foreign Bank Account Reporting is regularly a hot topic of enforcement for the IRS and Financial Crimes Enforcement Network. Penalties for non-compliance are high.
With improving technology, the FinCEN and IRS can match information from foreign financial institutions to taxpayer information and flag who is has not filed the correct information returns. So please don’t stick your head in the sand when it comes to dealing with FBARs. Talk to a professional to find out how you can avoid civil and criminal penalties.
Civil penalty for not filing an FBAR can begin at $10,000 for non-wllful violation and that isn’t per return per year.
No, that is per foreign account, per year! So it can stack up mighty fast.
Then there is Criminal penalties to consider if you have wilfully not filed your FBAR returns.
So What Can I Do?
If you are not up-to-date then don’t worry.
The IRS has various ways that you can become compliant with your income tax filings and these programs also extend to taxpayers who need to file FBARs.
To find out how you can stay up to date with your all your filing responsibilities contact a professional today using the contact form on this page or click here.