Have Money Overseas? Here’s How to Properly Report It
Offshore tax evasion is a serious offense and the IRS has taken measures to prevent it; Switzerland is generally closed off, and the organization has teamed with the UK and Australia to further discourage hiding money abroad.
So do you have to report your overseas income? That depends. If your balance totals $10,000 or more, you certainly have to file a special form to the US Treasury. Also, you are obligated to report your entire income, wherever it may accumulate or come from, including interest accrued on a foreign account. This applies if you have signatory authority over another individual’s foreign account.
Another circumstance may be the case. You might have a grandparent or generous relative that has a bank account with your name on it. This is an asset you need to report whether you are contributing or not. This reporting is slightly different than having a bank account to which your income goes. Below are the forms you may have to submit; one or all may apply to your overseas financial situation.
- FBAR (Report of Foreign Bank and Financial Accounts) Treasury Form TD F 90-22.1: Due June 30th of this year.
- FATCA (The Foreign Account Tax Compliance Act—IRS Form 8938): Due with your tax return.
- Inheritances and Gifts (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts–IRS Form 3520): Due upon receipt of the gift or inheritance.
There are no fees to file your income, inheritance, or accounts, but huge penalties if you don’t. Penalties include but are not limited to: $10,000 and up for FBAR, $10,000-$50,000 for FATCA, $10,000 or 35% of the money received (whichever is greater) plus additional fees for Form 3520. Further, penalties earn interest, and the IRS can demand these filings at any time, now or 15 years in the future, compounding the importance of reporting any and all foreign income.
In some cases, the IRS will waive penalties if you have ‘reasonable cause’ or if you acted in ‘good faith,’ if you weren’t aware of your filing obligations. However, these terms are highly subjective and can require a court appearance.
The IRS has collected billions of dollars by detecting taxpayers with offshore assets, thanks in part to snitches that are highly rewarded. Don’t risk the large penalties and legalities of not reporting – assess your foreign finances, the forms you need to fill out, and get filing here.