The Rules For Offshore Bank AccountsOffshore Account Update
Posted in on February 24, 2017
If you have any type of investments or financial products offshore, you must understand the rules for reporting those accounts and for paying taxes on investment income. A Virginia tax law firm can assist you in complying with the legal requirements for your accounts. If you have failed to comply in the past with reporting and tax requirements, an attorney can also help you to determine what options you have to minimize the possibility of penalties as the IRS becomes more aggressive at identifying offshore funds.
What are the Rules for Offshore Accounts?
Offshore accountholders need to know reporting requirements under the Bank Secrecy Act and under the Foreign Account Tax Compliance Act (FATCA).
The Bank Secrecy Act mandates that most accountholders submit an annual Report of Foreign Bank and Financial Accounts (FBAR). FBARs are completed on FinCEN Form 114 and must be submitted directly to the Financial Crimes Enforcement Network. This form is not submitted to the IRS with your tax return, although the deadline for submitting the form is April 15.
FBARs have to be submitted if you are a U.S. connected person and you have any kind of accounts or financial investments offshore with a total combined balance that exceeds $10,000 at any point during the course of the entire year. This means if you have multiple accounts and the balances combine to be more than $10,000, you are going to be required to file FBARs.
FATCA, which was introduced in 2010, also has reporting requirements for citizens, some non-residents of the United States, and aliens. FATCA requires that certain individuals with offshore accounts file Form 8938, Statement of Specified Foreign Financial Assets. This form is filed with the IRS if you are a single person who is living in the United States and you have offshore accounts totaling $50,000 on the last day of the tax year or offshore accounts that have a balance of $75,000 or more any time during the year. Married taxpayers who live in the U.S. have to submit Form 8938 if their accounts had a balance of $100,000 on the last day of the tax year or $150,000 any time over the year.
There is also a requirement that U.S. connected individuals who are living abroad report their accounts and investments at foreign financial institutions to the IRS, but the reporting requirements are higher than for people who are living in the United States. Single people have to report if their accounts are $200,000 at the end of the tax year or $300,000 any time during the year and married people have to report with accounts at $400,000 at the end of the year or $600,000 any time.
You should ensure that you are in compliance with these rules and with other requirements for having offshore financial accounts. A Virginia tax law firm can provide you with assistance in learning the rules, in fulfilling your tax obligations, and in exploring your legal options if you were supposed to comply with these rules in the past and are worried about possible penalties for non-compliance. Let attorney Kevin Thorn help.Share This Post