In recent years, the US government has implemented new measures to crack down on US expats evading their tax obligations. The newest development is in the form of the Foreign Account Tax Compliance Act (FATCA). This act is designed to help identify tax evaders by requiring foreign financial institutions to disclose financial accounts held by US taxpayers.
US expats who meet the minimum filing requirements specified under FATCA must report their foreign assets using Form 8938. The filing thresholds, which are listed below, apply to individuals and businesses with foreign financial assets, including but not limited to bank accounts, pensions, mutual funds and stocks. It’s important to note that there are different filing thresholds for individuals living in the US and those living abroad. For US expats, Form 8938 must be filed based on the following:
- Married filing singly: balance is over $200,000 on the last day of the year or over $300,000 on any day during the year
- Married filing jointly: balance is over $400,000 on the last day of the year or over $600,000 on any day during the year
- Thresholds are much lower for US citizens living inside the USA.
In addition to FATCA, US expats should also be aware of the FBAR. The Foreign Bank Account Reporting (FBAR) is applicable to individuals with a financial interest in a foreign financial account.
US expats with $10,000 or more in a foreign bank or financial institution are required to file FBAR Form 90-22.1. It is important to note that this amount is aggregate — all foreign accounts are considered together as whole. So if you have EUR2,000 in 5 accounts that would equal about $13,000 so you would need to report all 5 accounts on your FBAR.
Unlike Form 8938, this form is filed independently from your expat tax returns and it must be received by the Department of the Treasury no later than June 30th.
Although Form 8938 is in its infancy, the FBAR has been around for several years. As a result, those who fail to file may be charged civilly, criminally or both. That said, we have yet to see an expat who did not know they needed to file the FBAR face any penalty at all. If you have any financial accounts abroad or financial interest in foreign accounts, it’s important to understand the requirements for each of these forms, so that you can stay compliant going forward. In addition, if you have fallen behind on your US expat taxes now is a great time to catch up on your taxes, specifically using the IRS Streamlined Program.
This article was written by David McKeegan from Greenback Expat Tax Services, a team of CPAs and Enrolled Agents that specializes in US expat tax preparation. Need help filing or additional information on the FBAR and Form 8938,? We would love to help! Simply contact Greenback Expat Tax Services for a free quote.
Please consult a tax advisor for detailed tax advice before taking any steps.