Even if they are also citizens of another country, U.S. citizens have several tax obligations to comply with each year:
- They need to file tax returns if they have a filing requirement.
- They must report all worldwide income.
- They must file a Foreign Bank Account Report (FBAR) if their overseas accounts exceed $10,000 during the year.
- Form 8938 may need to be filed if foreign assets exceed certain thresholds.
U.S. Citizenship is Not Required
You may be required to file an FBAR even if you aren’t a U.S. citizen. U.S. residents are also subject to FBAR requirements.
For FBAR purposes, U.S. residents include green card holders and those who meet the substantial presence test. If you spend a lot of time in the U.S., you may have to file a tax return and an FBAR, even if you aren’t a U.S. resident for immigration purposes.
U.S. Immigrants
If you maintain a financial account in your home country, you may need to file an FBAR. If your aggregate account balance exceeds $10,000 at any time during the year, you must report all foreign accounts on the FBAR.
Bank accounts, investment accounts, cash value insurance policies, and certain other types of accounts may all trigger a requirement to file an FBAR.
Expats
If you retire or move overseas, you may want to open a bank account at a local bank. As long as you keep your U.S. citizenship, you’ll need to keep reporting all of your income to the IRS, filing tax returns, and possibly filing FBARs and other information returns.
This may seem like a substantial burden if you spend the majority of your time outside of the United States. A small number of people even go as far as renouncing their U.S. citizenship each year and avoiding U.S. tax requirements is likely a major factor in their decision.
Fixing FBAR Noncompliance
If you failed to file an FBAR in a prior year, you could be subject to a $10,000 penalty for each non-willful violation. Willful violations come with much steeper penalties.
You have the option to voluntarily disclose your noncompliance before the IRS discovers it. If you want to discuss your offshore disclosure options, consult a tax attorney.
The Gartzman Law Firm handles offshore disclosure matters and other tax resolution cases. Use our contact form to request a consultation with an Atlanta tax resolution attorney.