Because of the tendencies of certain wealthy citizens to hide assets in various types of foreign accounts, the U.S. government takes foreign account reporting very seriously. This fact is especially important for expats and digital nomads who probably need these accounts in their day-to-day lives, but it should be noted that similar requirements apply to those living in the U.S. who control a foreign account.
A number of factors can affect the reporting process for foreign accounts, though most Americans who have to send this information to the Internal Revenue Service will likely only have to do so through either the Foreign Account Tax Compliance Act (FATCA) or the Report of Foreign Bank and Financial Accounts (FBAR).
An experienced tax specialist would be a great asset to those who want to make it through these procedures with minimal pain. Ted Kleinman, CPA, has more than 30 years’ experience helping people with these very issues; no one is more qualified to help you overcome the IRS’s obstacles. Contact U.S. Tax Help today by calling (541) 923-0903.
Dealing with the Foreign Account Tax Compliance Act (FATCA)
Enacted in 2013, the Foreign Account Tax Compliance Act was a measure taken by the U.S. to combat tax evasion by citizens. This law established a new form, the Statement of Specified Foreign Financial Assets (Form 8938), and new guidelines for who needs to report foreign holdings. The primary factors that affect whether you need to file are marriage status, country of residence, and the total value of foreign assets through the year.
For taxpayers living in the United States, you must file Form 8938 with your tax return if:
- You are not married or are married and filing separately, and the total value of your foreign financial assets is greater than $50,000 on the last day of the tax year or greater than $75,000 at any point during the year
- You are married and filing a joint income tax return, and the value of your foreign assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year
For taxpayers living abroad, you must file Form 8938 with your tax return if:
- You are not married or are married and filing separately, and the total value of your foreign financial assets is greater than $200,000 on the last day of the tax year or greater than $300,000 at any point during the year
- You are married and filing a joint income tax return, and the value of your foreign assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year
FATCA does allow some exemptions, such as if a trust or foreign gift is reported on another form, but these intricacies are best navigated by someone with knowledge and experience. Reach out to U.S. Tax Help today to find a skilled CPA who can guide you through the process.
Report of Foreign Bank and Financial Accounts (FBAR)
Unlike Form 8938, the Report of Foreign Bank and Financial Accounts is filed electronically through the Department of Treasury’s Financial Crimes Enforcement Network using the form labeled FinCEN 114. Whereas the requirements to report accounts can be somewhat convoluted under FATCA, the reporting thresholds for filing an FBAR are fairly straightforward, regardless of where you live. All United States citizens must file an FBAR if:
- That person had a financial interest in, or signature authority over, one or more financial accounts outside the U.S.; and
- The total combined value of all foreign financial accounts was more than $10,000 at any point during the tax year
Luckily, the legislation that established the FBAR also mandates a six-month extension to the filing deadline; if you do not get the proper paperwork in to FinCEN by the April 15 deadline, you are granted a reprieve until October 15. Failure to report accounts as mandated by law can result in significant monetary penalties, so further delay is not recommended.
Streamlined Filing Compliance Procedures
If you believe that you may have failed to report foreign accounts to the IRS or FinCEN as required by the government, you may still be able to avoid penalties, even if several years have passed. As long as your lapse was accidental and has not been uncovered by an IRS civil examination, you can use the streamlined filing procedures to settle any unpaid taxes with the government while avoiding the fines and fees that normally come with missed payments. A qualified tax specialist can outline how these procedures could help you.
Get the Help You Need to Comply with US Tax Laws
Even in the best of situations, dealing with U.S. tax codes can cause one whopping headache. Considering the additional complexities of reporting foreign accounts – the extra forms, the mercurial thresholds, the steep fines – anyone who has to deal with this process can easily find themselves overwhelmed. Ted Kleinman and his team of certified public accountants have decades of experience helping clients overcome these very pitfalls. If you need a helping hand, contact U.S. Tax Help today at (541) 923-0903.