Do You Need to Disclose Foreign Financial Assets?
As a reminder U.S. residents (citizens, green card holders and those who meet a physical presence test) are taxed on worldwide income.
U.S. persons (including businesses) are required to file an Foreign Bank Account Report (FBAR) if: (1) the U.S. person had a financial interest in or signature authority over at least one financial account located outside of the United States; and (2) the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year.
The FBAR is due April 15, however, automatic extensions are granted to October 15.
Civil penalties for a non-willful violation can range up to $12,921 ($10k is now inflation indexed) per violation, and civil penalties for a willful violation can range up to the greater of $129,210 or 50% of the amount in the account at the time of the violation.
Penalties can be huge. In 2018, the Supreme Court declined to review a lower court’s ruling imposing a $1 million FBAR penalty [U.S. v. Bussell, (CA 9 10/25/2017)]
Besides FBAR reporting with the U.S. Treasury, taxpayers may also be subject to specified foreign asset reporting with the IRS.
If you are enjoying my tax and finance tips and would like to buy me a beverage