Our client base is very diverse in terms of nationality & places lived/worked. For this reason, we have countless clients that must report Foreign Bank and Financial Accounts (FBARs) as a component of their annual regulatory compliance. A few notes below about FBARs:
- If you had a non-US account with over $10,000 USD equivalent at any point in the calendar year, you must report the existence of that account (as well as all other accounts you had that year, even if the balances were small)
- You are not taxed on having this money. However, if there are interest or dividends earned, you should report them on Schedule D of your Form 1040 accordingly. This is where many will say, “but hold on, I already paid taxes to a foreign government.” No need to worry – you can get a credit for that on your US return
- If you had joint accounts or control over an account with over $10,000 USD equivalent, yes, you must report. This includes accounts with shares, certain types of life insurance policies, pension plans, etc.
- How do you determine exchange rates? The IRS is flexible about that, as long as you are consistent and not applying logic that aids in noncompliance. Additionally, the IRS has an exchange rate list that we can share with you if you contact us below.
- If your foreign account is actually a trust, you may have to file forms 3520 and/or 3520-A.
- If you missed filing these, there are severe penalties ($10,000 for a non-willful violation – the willful violation penalty is higher). However, we have quite a bit of experience avoiding these penalties, so feel free to contact us to learn more.
- Crypto currency accounts in offshore locations qualify for this, as do foreign retirement accounts if you want to be safe. At our firm, we prefer to err on the side of caution as you do not want to find yourself on the wrong end of an IRS agent’s interpretation of the code.
Contact us below for assistance.
IRS Form 8938 compliance
Aside from the FBAR, which goes to FinCEN, you may also need to disclose your foreign assets to the IRS.
- If you had an account with over $50,000 USD equivalent at the last day of the calendar year or over $75,000 at any point in the calendar year, you must report the existence of that account (as well as all other accounts you had that year, even if the balances were small)
- This includes brokerage accounts, interest in foreign entity, financial contract, etc. If your interest in the foreign entity exceeds 10%, you may also need to file form 5471.
- Contact us below for questions if you need to file this form & we can send you the checklist of items we need.
- If you are delinquent with this filing, we know how to assist with that, as well.
Note that absolutely none of the above for either section is professional advice unless you have retained us to examine applicability to your case. Also note that tax information changes frequently with the law.
George Dimov CPA and his team offer tax preparation services. We provide a fast and accurate experience. Give us a call to learn more about our individual tax services today.