IRS Foreign Account Reporting Requirements

If you have a foreign bank account, brokerage account, mutual fund, trust or other type of foreign financial account, you may be required to report the account to the Internal Revenue Service. Failing to do so will result in significant penalties.

All U.S. taxpayers, including U.S. entities, must report their interest in foreign financial accounts if the combined balance in the foreign accounts exceeds $10,000 during the tax year. This requirement also applies to U.S. taxpayers who have a signature authority over such an account, even if they do not own the assets in the account.  You must report the foreign financial accounts on Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (FBAR), by June 30^th following the tax year, and no extensions are allowed.

The IRS requires individuals to file the FBAR because foreign financial institutions may not be subject to the same reporting requirements as U.S. financial institutions. The FBAR helps the U.S. government identify or trace unreported income maintained or generated abroad.

In addition to the FBAR, all U.S. taxpayers are obligated to report their interest in certain foreign financial assets on Form 8938 (Statement of Foreign Financial Assets).  Unlike the FBAR, Form 8938 is filed with the taxpayer’s annual income tax return (i.e. April 15^th of the following tax year).  Form 8938 is used to report an interest in certain foreign financial assets with an aggregate value above $50,000 on the last day of the tax year or $75,000 at any time during the year (higher thresholds apply for married individuals or taxpayers living outside the United States).

If you believe that you may have a financial interest in or signature authority over a foreign account or asset that meets the above criteria, please contact us to determine whether the FBAR or Form 8938 rules apply to you.