The world has become much smaller.
Do I have to report foreign bank accounts and assets? Yes, you have to report them. HerrickGlobal professionals are here to help with foreign asset accounting and tax advice.
As compliance in the realm of foreign tax issues becomes tighter and more far-reaching, the acronyms involved become longer.
Foreign Account Tax Compliance Act (FATCA)
FATCA is a key component of the federal government’s push for heightened tax compliance among US taxpayers with foreign accounts. It was implemented to ensure that the US government has the necessary tools to effectively determine the ownership of US assets in foreign accounts. On February 8, 2012, the IRS issued proposed regulations to implement the new law. The proposed regulations were nearly 400 pages long and substantially modified the preliminary IRS guidance on FATCA.
Financial Crimes Enforcement Network (FinCEN)
Prior to July 1, 2013, all financial reporting of foreign accounts was made through a division of the US Treasury in Detroit in conjunction with the IRS. However, the IRS was relieved of their function after June 30, 2013 and it was turned over to the Financial Crimes Enforcement Network (FinCEN). Many taxpayers have wondered about the presumptive message that is sent regarding the expectations about US persons who happen to have legitimate foreign financial interests.
Along with the change of oversight of the Foreign Bank Account Report (FBAR) filing functions from the IRS to FinCen came the mandatory use of electronic reporting of all annual disclosures.
Foreign Bank Account Reporting (FBAR) FinCEN 114
Prior to 2016, the FBAR had to be electronically filed with the Financial Crimes Enforcement Network on or before June 30th of the year immediately following the calendar year being reported. The June 30th filing date could not be extended. However, beginning in 2016, the due date of FinCEN report 114(FBAR) was changed to April 15th, with a maximum extension for a six month period ending October 15th.
Who must file an FBAR?
A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceed $10,000 at any time during the calendar year. Note that this is not necessarily the balance at year-end. A US person includes all US citizens whether or not living in the US, US residents (under the Green Card Tests or Substantial Presence Tests), domestic partnerships, domestic corporations, and domestic estates or trusts.
Which Financial Accounts are to be Reported?
A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution. A financial account also included a commodity futures or options account, an insurance policy with a cash surrender value, and shares in a mutual fund or similar pooled fund. Lines of credit, credit cards, and individual bonds, notes , or stock certificates held directly by the filer, are not considered to be a reportable financial account. However, these investments may still need to be disclosed on Form 8938, Statement for Foreign Financial Assets.
Disclosing Specified Foreign Financial Assets (8938)
Use Form 8938 to report specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.
The rules for what constitutes a Specified Foreign Financial Asset, as well as how to value the many different types of such assets, are highly specific. Care should be exercised when obtaining information to ensure that only reportable assets are considered, and that the prescribed method of valuing each asset is followed. Reporting thresholds vary greatly based on filing status and total value of the assets. Speak with one of our professionals today and find out if you are required to file
At HerrickGlobal, we can give you peace of mind that comes with knowing you won't face the unknown alone. Our highly trained advisors can handle all your tax filing needs quickly and efficiently. Schedule an appointment today - we look forward to meeting you!