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Reporting Foreign Assets

In addition to your annual US tax return filing responsibility, if you are a US person and you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, you are required to file the Report of Foreign Bank and Financial Accounts (FBAR).

Report of Foreign Bank and Financial Accounts (FBAR)

This report is filed on FinCEN Form 114 and this is a separate filing from your US income tax return. The filing date is April 15th, although there is currently an automatic extension to October 15th for overseas residents. This report is required not only for US expats, but from any US taxpayer with a foreign financial account.

The FBAR is required if the aggregate balance of all your accounts exceeds $10,000 at any time during the year.

The penalties could really add up

Failure to file FinCEN Form 114 by the deadline can carry a substantial penalty. Historically the penalty was $10,000 per year per account if the failure to file was not wilful. Wilful failures could result in a penalty equal to $100,000 or 50% of the account, per year, per account. These amounts are now adjusted for inflation.

For penalties assessed after January 15th 2017, the FBAR penalty for a non-wilful failure to report is $12,921, and the penalty for a wilful failure to report is $129,210.

This form must be filed electronically. We can fill out this report for you or you can fill out the FinCEN Form 114 and submit it yourself from here.

Entities count as US Persons too

Please note: The above discussion focuses on individuals, however entities, such as corporations, partnerships, and trusts are also considered US persons and have worldwide tax and reporting obligations as well, including the FBAR.

Statement of Specified Foreign Financial Assets

US Persons may also need to file Form 8938 – Statement of Specified Foreign Financial Assets, which is filed with the US income tax return. The Form 8938 filing requirement is in addition to the FBAR filing requirement.

This form must be filed if certain thresholds are met during the tax year. These thresholds depend on whether the taxpayer is an individual or entity. For individuals, the thresholds rely on whether the taxpayer is married or single; and whether the taxpayer lives in the US or is a US taxpayer abroad.

Married or filing US taxes abroad?

  • Unmarried taxpayers living in the US:
    – The total value of the specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
  • Married taxpayers filing a joint income tax return and living in the US:
    – The total value of the specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year
  • Married taxpayers filing separate income tax returns and living in the US:
    – The total value of the specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
  • Taxpayers living abroad
    – Taxpayers filing a joint return and the value of the specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year
    – Taxpayers not filing a return other than a joint return and the total value of the specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year.

Specified Foreign Financial Assets include:

  • Financial accounts maintained by a foreign financial institution
  • The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution:
    – Stock or securities issued by someone that is not a U.S. person (including stock or securities issued by a person organized under the laws of a U.S. possession)
    – Any interest in a foreign entity
    – Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person (including a financial contract issued by, or with a counterparty that is, a person organized under the laws of a U.S. possession)

There are substantial penalties for failure to file Form 8938. These include:

  • $10,000 for failure to file
  • 40% penalty on the undisclosed income from the foreign assets
  • An extended statute of limitations to 6 years

Voluntary Disclosure

If you have failed to file any of these forms, we can assist you in bringing yourself up to date. (Click through for more on Voluntary Disclosure.)

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant