Does Living Abroad Impact FBAR & FATCA Requirements?
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Does Living Abroad Impact FBAR & FATCA Requirements?
US Persons (U.S. Citizens, Lawful Permanent Residents, and Foreign Nationals who meet the Substantial Presence Test) have an obligation to report their foreign bank and financial accounts each year to the IRS and FinCEN. There are many different international information reporting forms that a Taxpayer may be required to file, such as the FBAR (Foreign Bank and Financial Account Form aka FinCEN Form 114) and FATCA (Foreign Account Tax Compliance Act aka Form 8938). A common question becomes whether or not living abroad impacts the FBAR and Form 8938 FATCA reporting requirements? The answer is, that it depends. Lets’ review the basics of whether living abroad impacts U.S. FBAR &FATCA tax requirements:
FBAR is Still Required for Taxpayers Living Abroad
Whether or not a US Person resides in the United States or abroad does not impact their FBAR filing requirements. In other words, when a person relocates abroad, they still have the same FBAR reporting requirement that they would have had if they were living in the United States. In addition, the threshold does not change, which is “an annual aggregate total of more than $10,000 (USD) on any given day of the year.” Remember, the FBAR is not a Tax Form and is not filed with the IRS, but rather it is reported directly on the FinCEN website.
Form 8938 (FATCA) May Not Be Required For Taxpayers Living Abroad
Presuming all things equal, if a person relocates abroad and was required to file Form 8938 as a U.S. resident, they may not have to file the Form once they live outside of the United States.
Why?
Because the threshold filing requirements change for Taxpayers who are considered foreign residents. For example, a Married Filing Joint tax return in the U.S. has a more than $100,000/$150,000 requirement (year-end/max-value), whereas the same married filing joint return for foreign residents of the US is $400,000/$600,000. Thus, if a person has assets that are required to be on Form 8938 but not the FBAR (For Example, directly-owned stock certificates), they may avoid international reporting on these forms.
Noncompliance FBAR & FATCA in Prior Years
Taxpayers who were noncompliant in prior years should avoid Quiet Disclosures – which are illegal and can lead to significant fines and penalties. Rather, as a foreign resident, they may qualify for Streamlined Foreign Offshore Procedures – which provides a complete waiver of the Title 26 Miscellaneous Offshore Penalty.
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