U.S. citizens and residents with a financial interest in or signature or other authority over any foreign financial account requires to report that relationship by filing FinCEN Form 114 if the aggregate value of the accounts exceeds $10,000 at any time during the year. Failure to file can result in huge penalties.
Financial account comprises securities, brokerage, savings, checking, deposit, time deposit, or other accounts at a financial institution. Mutual funds, commodity futures and options accounts, and even non-monetary assets such as gold are also encompassed. It becomes a foreign financial account if the financial institution is located in a foreign country. If you own shares of a foreign stock or a mutual fund that invests in foreign stocks, and the stock or fund is held in an account at a financial institution or brokerage located in the U.S., this is not measured a foreign financial account, and the FBAR rules don’t apply to it. An account maintained with the branch of a foreign bank physically located in the U.S. also is not a foreign financial account.
If you are a US citizen or resident alien, you require to pay tax on foreign income. If any tax is paid on any foreign income in your respective country you may get a tax benefit from the government of US, but there is also a limit of exclusion for foreign income.
You might have an FBAR requirement and not even realize it. For example, maybe you have relatives living in a foreign county and they have put you on their bank accounts in case something occurs to them. If the combined value of those accounts exceeds $10,000 at any time during the year, you will need to file the FBAR. Or if you are gambling on the Internet, that online casino may be located in a other country, and if your bank account exceeds the $10,000 bound at any time during the year, you must have an FBAR reporting requirement.
You might also have an added requirement to file IRS Form ,which is similar to the FBAR requirement but applies to a wider range of foreign assets with a higher dollar threshold. If you are married and you and your spouse file a joint return, you must file IRS Form if the value of certain financial assets exceeds $100,000 at the end of the year or $150,000 at any time during the year. If you live abroad, the thresholds are $400,000 and $600,000, respectively. For other filing statuses, the thresholds are half of those amounts.
The penalty for failing to file is $10,000 per year, and if the failure continues for more than 90 days after you receive an IRS notice of failure to file, the penalty can go as high as $50000.
As you can see, not complying with the foreign account reporting requirements can have some very horrid consequences. Please let me know your specific questions or concerns so I can guide you further.
Sabu Syriac CPA, MBA
Certified Public Accountant
10900,183rd Street,Suite 171 C
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