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:
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:
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.
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.