Posted by Flynn Financial Group Inc

5 Things American Expats Should Know About the Foreign Bank Accounts Reporting

5 Things American Expats Should Know About the Foreign Bank Accounts Reporting

In case you are living abroad, the chances are that you’ve heard a lot about FATCA and FBAR. Do you know what they’re and whether you have to file or not? It is crucial that you completely understand because penalties for not filing in case required could be steep! Hence let us see the following things that you must know about the foreign bank accounts reporting as the US expat.

  • FBAR and FATCA are not similar

Foreign Bank Account Report (FBAR) and Foreign Account Tax Compliance Act (FATCA) are part of the US initiative in order to thwart the tax evaders who hide their assets in foreign bank accounts—and IRS is very serious about gathering the monies that are owed to them.

The FATCA has garnered the notoriety of late across the world, as the financial institutions are being forced for reporting on the foreign accounts of the American clients. Resultantly, a few foreign banks are now refusing to further work with the Americans in order to avoid the burden of these additional filings.

Neither FBAR nor FATCA actually result in more taxes that you should pay—they exist simply as the reporting requirements. It means that Department of the Treasury and IRS have to know regarding where your assets and money actually is, but you are not taxed at all on these assets while you report. The tax obligations are triggered (just like withdrawing of the funds from specific investment accounts).

  • The FBAR is just about the bank accounts

The FBAR is actually a report of the foreign bank accounts and the reporting prerequisites are solely based on the account balances abroad. So in case the foreign bank accounts (and any accounts that you’ve signing authority over) contains balances which exceeded 10,000 dollars at any point previous year, you should file the FBAR. It is one combined balance of entire accounts. Hence in case 1st account balance is 4,000 dollars and the second one is 7,000 dollars, both accounts should be reported.

FBAR is then filed to US Treasury Department through FinCEN Form 114. The deadline for filing is 30th June and unlike the US tax return, there are no extensions available.

  • The FATCA encompasses a wide spectrum of assets

The FATCA filings are a bit different from the FBAR. Whilst the bank accounts are actually part of the FATCA reporting and filing requirements are wider. You should file the FATCA in case a value of some specified foreign assets is more than the filing requirements that varies by residency and filing status.

The foreign financial assets are actually defined as the things like:

  • Foreign stockholdings
  • Foreign partnership interest
  • Foreign pensions
  • Foreign financial accounts (that is the bank accounts)

While thresholds for the US taxpayers residing abroad are given below:

  • A single filer: A complete value of the assets was about 200,000 dollars or even above this at the end of a tax year, or even 300,000 dollars at any time during that year
  • A Married filer: The complete value of assets touched 400,000 dollars or even more of that tax year at the end of the year, or 600,000 dollars at any time during that year

These thresholds are a bit lower for the people who are residing in the US (hence pay more attention to the information in case you are planning about moving back to the US in the future!):

  • A single filer: At the end of a tax year, the total value of your assets was 50,000 dollars or even more, or 75,000 dollars at any time during that year
  • A married filer: At the end of a tax year, The total value of the assets was 100,000 dollars or even more, or 150,000 dollars at any time during that year

The FATCA Form 8938 can be filed with the US Federal Tax Return hence in case you file for the extension on this then it applies to the FATCA form as well. You need to consult a tax preparer for help.

In case you do not have the US tax filing requirements (that is your income level is under tax filing threshold) then you are not needed to file the FATCA Form, regardless of a total value of the assets.

Flynn Financial Group Inc
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