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When to file taxes on foreign accounts

| Jul 30, 2020 | IRS |

Tax payers in Georgia and throughout the country are required by the IRS to pay taxes on foreign assets, or they could face stiff fines. The foreign accounts must reach a certain threshold before they need to be reported on tax returns. Foreign accounts may include stocks, mutual funds and bank accounts not issued in the U.S.

Anyone considered a U.S. citizen must report the income. In the eyes of the IRS, a U.S. citizen is considered one of the following: a resident, a non-foreign person, a domestic partnership, a domestic corporation or a non-foreign estate. The IRS considers a foreign person a non-resident alien, a non-U.S. person, or a non-U.S. corporation trust or partnership. A resident alien must past a substantial presence test and a green card test.

The IRS requires U.S. citizens or citizens living abroad to file an FBAR, or Foreign Bank Account Reporting form, when income exceeds $10,000 or more. Even if the accounts do not exceed the threshold, tax payers still have to report income.

The threshold for filing single or married filing separately is assets valued $50,000 on the final day of tax season and $75,000 throughout the tax year or $100,000 at the end of tax season and $50,000 through the tax year. For citizens living abroad, the IRS sets the threshold at greater than $200,000 at the end of tax season for single tax payers or married couples filing separately and more than $400,000 during the tax year for married couples.

An FBAR is not filed with standard tax returns. These forms must be filed before April 15, but extensions may be requested. Foreign financial institutions are required to report tax payer information to the IRS under the Foreign Account Tax Compliance Act.

Tax payers should not ignore requests from the IRS for financial information about foreign accounts. If a tax payer is not sure about reporting or faces legal issues, a tax law attorney may be able to help them.

We insist that your taxpayer rights are protected and your options are known.

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