According to the Financial Crimes Enforcement Network (FinCEN), the term U.S. person refers to “United States citizens (including minor children), United States residents and entities, including but not limited to, corporations, partnerships or limited liability companies (LLCs) created or organized in the United States or under the laws of the United States, and trusts or estates formed under the laws of the United States.”
A U.S. person is distinct from a “foreign person” who is generally considered a foreign student, nonresident alien, or a foreign corporation, trust, estate, or partnership. One of the primary reasons for understanding this distinction is the requirement to file a Foreign Bank and Financial Accounts (FBAR).
For U.S. persons, FBAR compliance is critical. The serious nature of FBAR civil and criminal penalties dictates that U.S. persons with offshore accounts stay up to date on reporting requirements and understand legal precedent involving offshore tax enforcement. For foreign persons, an FBAR is generally not required.
Threshold rules for filing an FBAR include the following:
A U.S. person must file an FBAR report if they hold ownership of at least one foreign (offshore) financial account that meets the reporting requirements. This includes residents, trusts or estates, LLCs, partnerships, and corporations.
To meet the requirement to file an FBAR, the aggregate value of one or more foreign accounts must exceed $10,000 at any time during the year.
Despite these requirements, several foreign financial accounts do not qualify for FBAR reporting. These include certain accounts held in military bank facilities, accounts owned by a governmental entity and certain retirement accounts in which you are a beneficiary or participant. For U.S. persons who qualify, the annual FBAR is due each year by April 15 with an automatic extension to October 15. The report is filed electronically through the FinCEN website.
The Internal Revenue Service (IRS) continues to prioritize offshore reporting compliance. Misunderstanding your residency status or taxpayer classification does not eliminate potential liability.
Determining whether you qualify as a U.S. person is the first step in understanding your foreign reporting obligations. For a more in-depth look at offshore compliance and reporting requirements, download our guide, "Offshore Tax Matters Explained."
Offshore reporting can be complicated. If you are concerned about your required reporting or whether your offshore tax haven is legitimate or a shell game, the tax attorneys at Robert J. Fedor, Esq., L.L.C. can help. Contact us at 440-250-9709 or set up a consultation for reliable counsel. We offer services to clients in Northeast Ohio, Chicago, New York, and internationally.