As a reminder of FBAR & Foreign Financial Account Reporting note a brief summary below.

We often receive inquiries regarding US tax filings for US or Dual citizens living abroad or Canadian Citizens who have taken residence in the US and find they are unaware of their requirements to report financial accounts to Department of Treasury. Below is a brief synopsis of the filing requirements and the associated penalties if a taxpayer fails to file, unwillingly or willingly.

A Foreign Bank Account Report, or FBAR, is required to be filed annually with your taxes when:

  • You are considered a US resident for tax purposes,

  • Have single or joint ownership, or authority over a foreign financial account,

  • And, the total amount of accounts is over $10,000

Failure to file this informational report can result in fines of $10,000 up to $100,000, or 50% of your account balances.

If you hold a TFSA (Tax Free Savings Account) or a RESP (Registered Education Savings Plan) you are required to file Forms 3520 &3520-A. While taxpayers are drawn to these accounts for their benefits in Canada, they do not offer the same benefits in the US. They require complex tax form to be prepared and filed annually and are not tax-free in the US and any income generated from these accounts is taxable. Failure to file these forms could result in a penalty $10,000, 35% of the gross value of distributions, or 5% of the gross value of portion owned by a US person, whichever is greater.

Form 8938, Statement of Specified Foreign Financial Assets, is required when:

  • You are US citizen, resident alien, or certain non-resident alien

  • If you are in the US and the aggregate amount in accounts is over $50,000 (single or married filing separately) or over $100,000 (married filing jointly)

  • If living outside the US and the aggregate amount in accounts is over $200,000 (single or married filing separately) or over $400,000 for married filing jointly

Failure to file Form 8938 could result in a $10,000 initial penalty, and additional $10,000 for each 30-day period after you receive notice from the IRS. Maximum penalty is $60,000. You may also face criminal penalties as well.

If you are the owner, or have signing authority, over foreign bank accounts and have questions regarding your US tax obligations please reach out to us and we are happy to consult!

The above information is of a general nature only and should not be relied upon for specific situations. Click here for additional tax services information.

Call Marlies Y Hendricks CPA PLLC at either 716-694-3500 or 910-769-8730 as required to set up an appointment.