While living abroad may be an adventure for U.S. expatriates, it does not relieve the annual filing of a tax return or the filing of a Report of Foreign Bank and Financial Account (FBAR).
Stateside, U.S. persons, trusts, and other entities who hold an interest in a foreign bank account, offshore tax haven, or other financial account must file an FBAR. Although some expats are hard-pressed to believe it, they are required to file the document as well. Unlike most of the rest of the world, the U.S. Treasury expects taxpayers to check in and pay their due—wherever in the world they may happen to live.
What You Need to Know About an FBAR
FBAR filings are due from individuals who have signature authority over an account (or accounts) in a foreign country. An FBAR is required from those whose account (or accounts) exceed $10,000 at any time during the calendar year.
While your FBAR is due at the same each year as your tax return on April 15, the FBAR is not submitted with your tax return. Instead, it is electronically filed through the website of the Financial Crimes Enforcement Network (FinCEN). While filing on time is always the aim, the IRS grants an automatic extension for filing by October 15—no extension application is required. Given the lenient filing window, the IRS expects those with the wherewithal to maintain foreign accounts to file their report on time. Trouble begins if you fail to file an FBAR in any given year and do not otherwise report and pay taxes due on your account.
Remember Filing Details and Deadlines
Pay attention to filing details and deadlines. FBAR penalties can be severe. Failure to file, or filing a fraudulent FBAR can lead to money penalties and civil and even criminal charges. As noted by the IRS, "civil monetary FBAR penalties have varying upper limits, but no minimum.” Penalty amounts are adjusted for inflation each year.
There are also exceptions to who is required to file an FBAR—such as foreign accounts that are maintained on a U.S. military banking entity, or those held in a retirement plan. If your offshore holdings are complex, or you have not filed your FBAR in a timely manner (or at all) for several years, speak with a tax attorney experienced with offshore tax matters and the specificities of FBAR reporting.
Expert Legal Guidance for Expatriates
Living abroad is a great way to see the world. Just remember that out of sight is not out of mind for the IRS. If you are an expat and need advice on your FBAR, or are delinquent in filing—set up a consultation with us at Robert J. Fedor, Esq., L.L.C. to discuss your circumstances. We provide experienced, strategic representation to offer the best options for your situation. Call us at 440-250-9709. With offices in Cleveland and Chicago, we deliver trusted representation to domestic and international clients.
For a more comprehensive look at the requirements and implications of offshore tax obligations, download our eBook, Offshore Tax Matters Explained. This resource is designed to provide valuable insights into managing your financial responsibilities effectively, no matter where in the world you might be.
