The United States tax system operates on the principle that U.S. citizens and residents are taxed on their worldwide income. To enforce these laws, the IRS has imposed various filing obligations backed up by draconian penalties for those who fail to comply.<\/p>\n
Below is a summary of the most common filing requirements and possible penalties.<\/p>\n
This can be a very complex area of US taxation and this article is meant only as a review of the basics. You should contact an expert for questions on your specific situation. If you are in need of an expat tax expert, please contact on the right for a referral.<\/p>\n
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One of the most critical filing requirements is the Report of Foreign Bank and Financial Accounts. Anyone who is a signor or beneficial owner of a foreign bank or brokerage account(s) with more than $10,000 must disclose these accounts to the U.S. Treasury.<\/p>\n
The law imposes a civil penalty for not disclosing an offshore bank account or offshore credit card up to $25,000 or the greatest of 50% of the balance in the account at the time of the violation or $100,000. Criminal penalties for willful failure to file an FBAR can also apply in certain situations. Note that these penalties can be imposed for each year.<\/p>\n
In addition to filing the Foreign Bank Account form, the offshore account must be disclosed on your personal income tax return, Form 1040, Schedule B.<\/p>\n
Fyi\u2026 the name for this form changed from TD F 90-22.1 to FinCEN Report 114 in 2013. This, and the fact that those of us in the business still refer to it as the FBAR, has caused some confusion around the web.<\/p>\n
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You should file your FBAR and most foreign returns (described below) with your personal return on April 15. If you have a foreign trust, Forms 3520 and 3520-A are due March 15.<\/p>\n
You might choose hold your foreign structure in a US corporation. This moves most of the reporting off of your personal return and on to the corporate return. In this case, the foreign entity forms are due March 15 and attached to the US corporation\u2019s Form 1120.<\/p>\n
If you extend your personal return using IRS Form 4868 to October 15, most foreign forms are also extended. To extend a foreign trust or a structure in a US corporation, you need to file IRS Form 7004 by March 15.<\/p>\n
Note that the due date for the FBAR is June 30 and no extensions are available. I recommend you file the FBAR along with your personal return on April 15. If you extend your personal return, your FBAR is still due by June 30.<\/p>\n
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There are a number of filing requirements for international corporations and trusts. Failure to file the required returns may result in civil and criminal penalties and may extend the statute of limitations for assessment and collection of the related taxes.<\/p>\n