Do Americans Living Abroad Have To Report Foreign Accounts?

Do Americans Living Abroad Have To Report Foreign Accounts

Citizenship comes with its perks, but American citizens living abroad are often subject to two tax systems, as they are required to file U.S. taxes on their worldwide income. Furthermore, all Americans with worth at least $10,000 in foreign accounts need to report their accounts. This is done through a Foreign Bank Account Report (FBAR); here’s how to go about it and all of the information you’ll need.

What Is an FBAR?

An FBAR is a reporting form established by The Bank Secrecy Act in 1970 to help the U.S. government combat offshore tax evasion. 

The U.S. government has risen up its monitoring of foreign accounts in recent years, so it’s important to know if you qualify and how to go about filing properly.

Are You Required to File?

Here are the qualifications affecting who does and does not have to file an FBAR:

1. Have at least $10,000 in foreign financial accounts. This includes:
   1. Bank accounts kept at a foreign bank (both checking and savings)
   2. Bank accounts kept at a foreign branch of a US bank
   3. Overseas mutual funds and pension funds
   4. Stocks or securities kept in a financial account at a foreign financial institution
   5. Foreign-issued life insurance or annuity contracts with the cash value
2. Joint (unmarried) account holders will each need to file separately for the full value of the accounts.
3. Married account holders can file a single form together.

If You Didn’t File

There are a few options for those who weren’t aware of (or ignored) these requirements. Keep in remembrance, though, that the IRS is not to be trifled with – they’re the guys who got Al Capone – so do your due diligence.

For those who genuinely weren’t aware of the requirements to file a U.S. tax return and FBARs, including expats overseas, the world isn’t over quite yet. The IRS offers a voluntary disclosure program called the “streamlined procedure.” This is a penalty-free path for expats who truly didn’t know about the U.S filing FBAR requirements. Or, if you filed your U.S. taxes but didn’t know about FBARs, there’s the Delinquent FBAR Submissions Procedures program.

If, however, you purposefully ignored your FBAR requirements, there are some issues. First and foremost, every year that you don’t file comes with a $10,000 fine per year for unintentional misfiling. If you purposefully avoided it, the fines are much larger and could potentially come with jail time.

Assuming you want to right your wrongs, seek advice from an expat tax specialist as soon as possible.

What is the Filing Deadline for FBAR?

The filing deadline for FBAR forms is April 15, with an automatic extension until October 15 for all Americans.

Final Thoughts

FBAR requirements through the IRS are strict guidelines for reporting money in foreign financial accounts. 

And keep in mind – the IRS gets data from foreign banks, just like it does domestic ones. So it’s likely they do know how much your accounts are worth, meaning it’s better to play things safe and file properly.