The long arm of the Internal Revenue Service (IRS) reaches for monies you keep anywhere in the world. Accurate reporting is key to remaining compliant and off the radar of the IRS.
The IRS rigorously enforces reporting requirements on financial accounts abroad or in offshore tax havens. If you live abroad or travel frequently, maintaining an account in a foreign country is useful or necessary. Similarly, keeping funds offshore can be a useful aspect of an investment or asset management strategy.
An annual Report of Foreign Bank and Financial Accounts (FBAR) is required of U.S. persons who maintain a certain threshold of money in a foreign account. The report plays an important role in helping deter tax evasion and other tax crimes in the U.S. and around the world. Foreign financial institutions and account holders are required to file reports with the IRS. The IRS then compares reports to ensure appropriate taxes are paid on monies held around the world.
Types of reportable accounts can include:
- Financial accounts held abroad
- Retirement accounts in foreign countries
- Annuity, life insurance, or mutual funds maintained at institutions or banks in foreign countries
- Accounts located in an offshore branch of a U.S. banking or financial institution
- Accounts for which you may not own the asset, but have control over the disposition of assets
Essentially, the U.S. is looking for non-domestic accounts in which you may have a financial interest. Regulations around FBAR reporting can come as an unwelcome surprise to people who live in foreign countries but who may also hold U.S. citizenship. Although these dual citizens may have little to do with American interests, U.S. citizenship means taking a close look at the threshold requirements for FBAR reporting.
An FBAR report is required of those with a financial interest or authority over an account held outside of the U.S. if the value of that account (or accounts) exceeds $10,000 at any time during the reporting year. This means if you have several accounts which together meet the $10,000 threshold, an FBAR is required.
As with many regulations, there are also exceptions, a few of which are below:
- IRA accounts for which you are the beneficiary or owner
- Accounts owned by a government entity or maintained in a U.S. military facility
- Correspondent or Nostro accounts
FBAR reports are not submitted with your U.S. tax return but on the Financial Crimes Enforcement Network (FinCen). If you have questions about compliance or returning to compliance, speak with an experienced tax attorney in your area.
Talk with skilled tax lawyers today about FBAR requirements
The legal team at Robert J. Fedor, Esq., LLC delivers strong legal representation to clients throughout the U.S. and abroad on matters of compliance, FBAR or FATCA reporting, or IRS criminal or civil audits. When you have tax questions, call us at 800-579-0997 or contact us. We have offices in Cleveland and Chicago.