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Whenever you are dealing with taxes or the IRS, the list of unknowns and potential issues is neverending. This is especially true in today’s world, where everything is done on a global scale. If you are a taxpayer (as an individual or a business) living in the United States, then you should be used to filing your taxes every year.
But what if you have foreign bank accounts or investments? Who tracks that money and any activity associated with it? Well, it shouldn’t come as too much of a surprise that there are some federal regulations in place that might require you to report those international assets. The IRS calls it filing a Report of Foreign Bank and Foreign Bank Accounts (referred to as “FBAR” for short). However, whether you do or not depends on the size and type of those accounts.
FBAR explained
If you have international financial accounts, then you might be required to report such interests each year to the IRS by filing an FBAR. There are several things that fall under this requirement, such as any foreign bank accounts, mutual funds, trusts, or brokerage accounts. The deadline to file was recently updated to coincide with tax day, so you don’t have to worry about multiple filing deadlines.
Who needs to file?
Although not everyone with a foreign bank account is going to need to file an FBAR, a large number of accounts and interests will fall under its umbrella, so it’s important to pay attention to the details. First, only “United States persons” will be required to file it. For the purposes of FBAR filings, such “persons” include U.S. citizens, residents, and entities. Specifically, the types of entities included are corporations, partnerships, and limited liability companies that were created in the U.S. and under its laws. Next, whether a U.S. person needs to file depends on if they meet both of the following two points:
- They have a financial interest in or are a signatory (meaning they have authority) of at least one financial account located outside of the U.S. and
- The combined value of all the person’s foreign accounts exceeds $10,000 at any time during the applicable calendar year.
This can get confusing because a person might need to file an FBAR even if their foreign asset produces no taxable income. There are also many exceptions to an FBAR that further muddle the waters, so figuring out whether you actually need to file can be difficult. And finally, you want to make sure that you are filing if your foreign accounts fall within FBAR’s reach, because there are penalties associated with failing to do so.
Consult an experienced Florida and federal tax attorney.
At Weisberg Kainen Mark, PL, we understand how confusing filing different forms with the IRS can be. Whether you need to file and what they need can be difficult to figure out, so it’s important that you work with an experienced tax attorney for any questions you might have when it comes to the IRS’s filing requirements. If you have questions about whether you need to file an FBAR for your foreign assets, please don’t hesitate to contact us today.
Weisberg Kainen Mark, PL
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