Maintaining some of your wealth through the use of an offshore tax haven can be a good strategy for growing and shielding your money. Americans living abroad routinely use foreign financial institutions for their banking and savings needs. Part of protecting your investment is remaining aware of US regulations around the reporting of assets held in foreign accounts.
In 1970, the United States adopted the Bank Secrecy Act (BSA), primarily to address the growing problem of international money laundering. The BSA now includes anti-terrorist provisions, including the Patriot Act, to deter funding of terrorist organizations and their networks. Not surprisingly, the BSA sought to make foreign banking transactions more transparent. A Report of Foreign Bank and Financial Accounts (FBAR) is one of the tools used to unmask unreported financial transactions quietly taking place abroad.
Points about the FBAR
Some of the requirements for filing an FBAR include:
- You must have ownership or authority over an account held by a foreign interest. This includes nominees to accounts, not just owners.
- The aggregate value of the account must have reached $10,000 at any point during the year. Errors of understanding commonly occur on this one. This does not mean the end of the year, or at tax time—it means any time during the year and is not tied to taxable income associated with the account. For expats, it is important to remember the word “aggregate” is in play here. That means an American living abroad may have an interest in several foreign accounts, like annuities or mutual funds—but perhaps none of them individually top out at $10,000 during the year. Keep it mind the combined value of these interests can easily put you within the reach of an FBAR.
- The FBAR is due on April 15, just like your tax return, but the similarity ends there. While tax returns are filed with the Internal Revenue Service (IRS), FBARs are filed with a department of the US Treasury, the office of Financial Crimes Enforcement Network (FinCEN). Some people file for an extension on their tax returns, thinking that will cover their FBAR as well—it does not.
There are also a number of types of accounts that do not have to be reported, such as those maintained in a US military banking facility, or if you are a beneficiary of a trust that is otherwise being reported on the FBAR of another individual.
Smart money is on using offshore tax havens wisely and legally. When you have questions about your FBAR, or about structuring foreign bank accounts, speak with a reputable tax attorney to learn about options.
Experience legal help if you are charged in a criminal tax matter
Our criminal defense tax attorneys are your first call if you receive word of tax allegations or litigation involving a tax return, payroll tax issue, or offshore interest. From offices in Chicago and Cleveland we assist clients throughout the US and abroad. Call 800-579-0997 or contact us today.