Having an overseas account is a great way to find the most competitive rates for your savings by going throughout the whole world rather than just relying on what is present in the United States. American citizens are more than welcome to use these accounts in order to preserve their money and many overseas banks try to lure them in by offering such competitive rates that they can’t get at home. While it is allowed to have these accounts, you need to make sure that you are using the proper claiming procedure at the end of the year and not using the accounts to hide money from the IRS.
It is important that you know the rules necessary in order to claim some of your overseas accounts. You will not get in trouble with the IRS for these accounts, as long as you know some of the rules that come with it and you claim the accounts when necessary. The trouble comes when you are hiding the accounts and the IRS finds out through the year. If you have an overseas account and want to make sure that you are claiming it properly, make sure to contact your local tax professional to help you out.
When to Claim
Knowing when to claim your foreign accounts is sometimes difficult. If your account stays under $10,000 for the whole year, never going above that amount even once, you do not need to claim the bank account. But if at any time the account gets to $10,000 or above, you will need to claim it. It does not matter what the balance is at the end of the year or if the account had $10,500 for one day and then went back down to $9,500, you will still need to claim it.
This is why it is so important to keep good records of your accounts through the whole year. You will be able to bring these statements and the other paperwork into your tax professional’s office and get help with your foreign bank accounts. They will be able to discuss whether or not you need to claim these accounts and the steps that you will need to take in order to get it all taken care of.
The key here is to never hide the bank accounts from the IRS. They will find out about this money and you will get in trouble for hiding it from the government. Consider talking to your tax advisor to ensure that you are claiming things when you need to each year.
Penalties of Not Claiming
It is very important that you claim your overseas accounts when required during tax season. While the IRS is not able to tell everyone who has an account on their own, there are often some red flags that go up and they do often catch those who are trying to hide the accounts. For example, if your lifestyle is way above what your income levels state on the tax return, the IRS may start to look a bit more for hidden money, and that leads them right to your foreign accounts. In addition, there could be whistle blowers who call into the IRS and bring your foreign accounts to the governments attention.
Usually the penalties for this issue will be in the form of heavy fines. Usually they will be able to levy the usual taxes on the money, plus more since you were trying to hide it from being taxed in the first place. It is always best to claim your foreign bank account income to avoid these issues.
Luckily, there are some rules in place to help protect those who may not have known about some of the rules. Since some of the rules about foreign accounts are relatively new, the IRS does give a few exceptions. For example, if you did not realize that you had to claim if your account got to $10,000 or above at any time of the year, you thought it had to stay consistently there, and so you didn’t claim, you could still file later and not get penalized. The trick here though is to claim before the IRS finds out about the account or you will still be in trouble.
Finding Professional Help
If you are dealing with an overseas account, it is a good idea to hire a professional who will be able to help you out from the very beginning. A tax professional in your area will be able to show you when and how to make a claim on the foreign bank account and will answer all of your questions when it comes to this account. In addition, if you have fallen behind on not claiming this account and would like some help doing so before getting into trouble with the IRS, make sure to contact a tax professional as soon as possible. This will ensure that you are getting the very best help and not making the mess any worse.
While having a foreign bank account is fine, you do need to make sure that you are claiming this account and the money that is inside the account at the right times each tax season. Hiring a tax professional to help out with this can make a world of difference and will ensure that you are getting the help that you need at the right time. Contact our offices today to get started.
