The following is a summary of some very important filing requirements for all US RESIDENTS. But they are particularly relevant to many Internationals who are not aware that the US Government requires RESIDENTS for tax purposes to 1) declare their worldwide income and 2) report about their worldwide financial assets to the US government each year.
1)Do you have foreign (Non-USA) Bank or other financial accounts? And are you filing your US tax return as a RESIDENT? Then you may be required to file additional forms with the US government to report those accounts:
A) You must file a FBAR (Foreign Bank Account Report by October 15, 2023 (Automatic Extension included) to report:
1) A US person (includes Residents)
2) Who has a financial interest in, signature authority over, or other authority over
3) One or more bank, securities, or other financial account(s)
4) Located in a foreign country
5) And the aggregate value of the accounts exceeds $10000
6) At any time in the previous calendar year.
This form (commonly referred to as the “FBAR”) is filed independently of your US Resident Tax Return. In fact it goes to a different address.
B) Also needed is the seemingly redundant filing requirement to report the same information as the FBAR and more to the US government with your US RESIDENT tax return form 1040. This form 8938 must be filed if you are a RESIDENT for Tax purposes AND:
You have an Interest in a “specified foreign financial asset,” i.e.
Any financial account maintained by a foreign financial institution, except for a U.S. branch of a foreign financial institution,
Other foreign financial assets held for investment that are not in an account maintained by a U.S. or foreign financial institution, namely, Stock or securities issued by someone other than a US person, any interest in a foreign entity, and any financial instrument or contract that has an issuer or counterparty that is other than a US person,
The aggregate value of all your specified foreign financial assets is more than the following applicable reporting thresholds:
Unmarried taxpayer living in the US has more than either $50,000 on the last day of the year or $75,000 at any time during the year
Married taxpayers filing a joint income tax return and living in the US. The total value of all your specified foreign financial assets is more than $100,000 on the last day of the year or $150,000 at any time during the year.
There are many rules with respect to the requirements of form 8938 and the FBAR. The above is just a summary of the most prevalent situations and is not intended to detail all of the requirements. There is one exception, and that is if you have no requirement to file a US tax return, but otherwise meet the requirements for filing form 8938, you do not have to file form 8938.
OH! AND BY THE WAY. THE PENALTIES FOR FAILURE TO COMPLY WITH THE ABOVE REQUIREMENTS START AT $10000.
2)You must report your worldwide income on your US tax return if you are a RESIDENT for tax purposes.
3) SCENARIO: US Resident goes for a semester study abroad in a foreign country. Her parents transfer $20000 to a foreign bank account their daughter has set up in her name in the foreign country so that she can pay for her room board and tuition. The money enters her foreign account on December 26, 2012 and she pays all of her expenses on January 2, 2013. Did you know that she will have to file FinCEN Report 114 (FBAR) for both 2012 and 2013. If the amount was $80000 instead of $20000, and she had a US filing requirement for 2012 and 2013, she would have to file an FBAR and a form 8938 for both years.