Must Americans Residing Overseas Still Report Foreign Accounts?
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Do Americans Who Live Overseas Still Report Foreign Accounts?
One of the most complicated aspects of US tax and reporting to the Internal Revenue Service for expats is simply understanding the requirements for Americans who reside outside of the United States in a foreign country. Unlike most other countries in the world, the United States follows a worldwide income tax and reporting model. That means, a US person who resides outside of the United States –– even if they live abroad full-time — must still comply with the US tax code and report their worldwide income along with reporting their foreign accounts. But, due to the change in threshold filing requirements under the FATCA (Foreign Account Tax Compliance Act) for foreign residents as opposed to US residents, even if the FBAR is still required, the taxpayer may be able to avoid IRS Form 8938 reporting – and if the Form 8938 was the only required form and not the FBAR or any one of the other international information reporting forms – the Taxpayer living abroad may be able to avoid reporting altogether.
Do Americans Who Live Overseas Report the FBAR?
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.
But, Form 8938 (FATCA) May Not Be Necessary For Americans Who Live Overseas
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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