The IRS has been aggressively prosecuting Americans who fail to report foreign investments. These are information-only reports. In other words, you don’t have to pay tax, but the IRS does assess a penalty as much as $50,000 if you fail to file.
Here are the basics for two of the forms you may be required to file:
FBAR or TD 90.22
If you and/or your spouse have interest in a foreign account or signature authority over a foreign financial account that is $10,000 or more at any time, pay attention!
You are required to file a “FBAR” report by June 30th and there is no extension available. The official form number is TD 90.22.
This is not filed with your regular income tax return and needs to be mailed to:
Department of the Treasury
Post Office Box 32621
Detroit, MI 48232-0621
As with all tax returns and correspondence to government agencies, make sure you mail it return receipt requested.
If you have more than one foreign account and they add up to $10,000 or more, you will need to file. If you and your spouse have joint ownership, you can either file a form individually for each of your or you can both sign the return.
There is no tax due, but there is a big penalty if you fail to file.
The Form 8938 is filed with your individual tax return and is to be used if own ANY foreign assets that are valued at $50,000 or more. This is the form you use to report international real estate holdings, as well as financial accounts, as long as they aggregate more than the limit.
The test for this isn’t quite as simple as the TD 90.22.
File this form if:
- You are an individual or married, filing separately, then you need to file if you have $50,000 value at the end of the year and/or $75,000 at any time during the year, or
- You are married, filing jointly and live in the US and have $100K value at the end of the year and/or $150,000 at any time during the year.
If you are an American living abroad, the limits are a little higher but you still may have to file as well.
The penalty for failing to file is up to $50,000 and even possible jail time! So, don’t miss this critical filing.
If you need help deciphering any of these complicated laws or realize you should have filed and did not, please get hold of us right away. We can help.