How Do You Report Your Taxes if You Have Bank Accounts Overseas?
Some people may be under the misconception that because they have a bank account overseas that they don’t have to report it to the Internal Revenue Service (IRS). This is a false assumption. If you are a United States (US) citizen and earning money, you are required to pay taxes on all of the money that you’ve earned, whether it’s domestic or overseas.
It’s the Law!
By law, you are obligated to report worldwide income whether it’s earnings, interests, and dividends—anything that adds to your annual income. You’re typical annual filing will not have anywhere to report overseas income, but that doesn’t mean that you aren’t to report it.
According to the IRS, any taxpayer receiving over $10,000 at any time during the tax year overseas needs to report these earnings. Even if you have a financial interest in an overseas account outside of the US and/or have signature authority, you will be required to file a Report of Foreign Bank and Financial Accounts (FBAR).
What is an FBAR?
The FBAR is a form that needs to be filed and submitted to the Financial Crimes Enforcement Network (FinCEN). FinCEN is a bureau of the US Treasury Department. The FBAR is filed separate from the normal tax filing. You would need to use Form 114 that can be accessed online here. Also, this form can only be filed electronically through the BSA E-FilingSystem website here.
If your foreign assets exceed $50,000, then you must file the FBAR with Form 8938.
When it comes to foreign tax fraud—neglecting to report worldwide income, hefty penalties can occur. The IRS has the right to pursue any delinquent or fraudulent FBAR filings up to 10-20 years and you can pay up to 20-75% on penalties alone. For anyone who is qualified to file for the FBAR, this could cost you at least an additional $2,000. Of course, this depends on how much money you have abroad.
For Married Filers
If you are filing married or married filing separately, only one person can actually claim the overseas funds so it needs to be specified on Form 114a as to which person is actually filing the FBAR.
If you are involved with multiple businesses that have different tax identification numbers, then you are required to submit an FBAR for each one.
Making Sense of it All
When it comes to accounting for a worldwide income, things can get complicated pretty quick. These complications can lead to confusion and being misinformed. All of that can lead to late filing and late payments—which all lead to late penalties! If you want to avoid late penalties, consult with tax relief professionals who know their way around these kinds of matters.
Success Tax Relief specializes in communicating with the IRS and government entities for over 30 years. Our team of experienced CPA’s, accountants, tax preparers, and tax lawyers are always ready to apply their expertise toward resolving any tax issues you might have. Call us today at 1-877-825-1179 or contact us online.