Cross Border Tax

FBAR now requires Cryptocurrency Disclosure

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FBAR

FBAR now requires Cryptocurrency Disclosure

On New Year’s Eve 2020, the IRS quietly dropped a bombshell as it announced it would begin tracking Bitcoin and other cryptocurrency transactions as a means of combating tax evasion. The IRS says that it intends to add virtual and cryptocurrency accounts as a reportable account under FBAR rules.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) intends to propose a rule that would amend the Bank Secrecy Act and the way foreign bank account reports are filed, including digital currencies as a form of foreign currency.

FinCEN, an acronym for the Financial Crimes Enforcement Network, is a US regulatory body that monitors trends in money laundering and other financial crimes. It has a global reach, and already requires Americans (including expats) with foreign accounts to report them annually by filing a Foreign Bank Account Report.

 

What is FBAR reporting?

If you are an American citizen or hold a Green Card, you must file taxes in the United States every year. This includes Americans who live abroad.

American taxpayers who live or work outside the United States can decrease their US tax bill with certain credits and exemptions, such as the Foreign Tax Credit and the Foreign Earned Income Exclusion.

Additionally, they may be required to report any financial accounts located outside the United States that require their permission to make withdrawals or otherwise conduct transactions (even if the account isn’t registered in their name, such as a joint or business bank account).

Foreign financial accounts include most bank and investment accounts registered in other countries.

“The rule change would appear to bring FBAR rules around crypto holdings in line with cash held outside the U.S. by citizens or other U.S. persons. It could have the most visible impact on users of crypto exchanges like Bitstamp and Bitfinex.” – Yahoo Finance.

 

How are cryptocurrencies currently reported?

Previously, the IRS said it was not necessary to report Bitcoin and other cryptocurrencies on FBARs, but the latest statement indicates that this will soon change.

If you receive any virtual & cryptocurrency in exchange for providing a service, you need to report that as income. If you make any gains on the sale of cryptocurrency, those transactions can be taxed under the rules governing capital gains.

 

When did the change take place?

The FinCEN statement on December 31, 2020, addressed changes to FBAR reporting rules, rather than indicating an immediate change.

Policymakers will need to be mindful of the fact that their new rules will need to be written carefully if they are going to avoid unintended consequences. For example, should the rules require cryptocurrency wallets to be reported in addition to wallets hosted by virtual coin exchanges?

The announcement of a proposed change in policy for virtual currency exchange platforms comes shortly after another announcement requiring such firms to report American clients. It’s unclear how this will be enforced, however, given that foreign banks and investment firms already do this as required by the FATCA law.

 

Bottomline

While there are still many unanswered questions, the reality is that any American with a Bitcoin or cryptocurrency wallet should seriously consider their FBAR filing requirements. This includes individuals living abroad who must report their worldwide income on their U.S. tax returns. Given the rising popularity of this new form of money, the IRS may well increase its enforcement efforts in identifying holders of digital currency and hold taxpayers accountable for their use of the currency for tax purposes.

Don’t know how to accurately report your crypto income and holdings? Send us a message and let our Enrolled Agent help you steer clear of the IRS’ bad side.

Get in touch with us today!

Top 3 tax issues for Canadians moving to the US

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US and Canada flag puzzle pieces

Top 3 tax issues for Canadians moving to the US

The US and Canada have an undeniably close connection. For the most part, we share the longest unguarded border in the world, and as many as 90% of Canadians live within 100 miles of the border. Further a quarter-century into NAFTA, it is no surprise that our economies are highly intertwined.

Despite the amicable relationship of both countries, there are still some tax issues that arise. Some are well known and are resolved immediately and some tax issues are less known despite the frequency with which they arise for unsuspecting Canadians. Despite the tax treaty between the US and Canada, the domestic tax systems of each country are remarkably different, and cross-border tax planning is critical to avoiding these top 3 tax issues for Canadians moving to the US.

 

Tax issues and rules to keep in mind:

  1. Canadian Departure Tax

Moving to the US bears a lot of important tax issues to remember when planning a move from Canada to the US.

Upon Canadian residency termination, Canada will impose a deemed disposition of most assets, the deemed disposition is commonly known as “Departure Tax”. This deemed disposition is a crucial tax issue that often results in a significant tax bill in the year of departure. This is a tax that would have been payable at some point, but without actual proceeds to pay the tax. US-bound migrants are wise to consider the extent of the departure tax well in advance in case pre-departure tax planning can reduce the Canadian tax bill.

Furthermore, pre-departure planning is necessary to ensure that one’s financial status is ready to be subjected to US tax rules. Understanding the US tax treatment of foreign investments can reveal areas of improvement that should be made prior to leaving Canada. So take this tax issue in mind when finalizing your move down south.

 

  1. Taking Title on US Property

Canadians have continuously ranked among the top international real estate investors in the United States for the past decade or more. The volume of purchases is enormous, whether for personal vacation usage or as an investment plan to earn rental income and capital profits. How to take title is a critical topic that discerning Canadian purchasers need to be answered.

Of course, the answer to the question depends on a variety of criteria, including the property’s planned use, estimated holding time, source of finances, and the buyer’s net worth. Furthermore, there are numerous possibilities for obtaining title, including personal names, corporations, partnerships, and trusts, all of which have various arrangements.

The standard model is that when it comes to title structure, there is no one-size-fits-all solution. As a result, prospective Canadian buyers of US real estate should seek assistance from a tax professional who is familiar with the interactions between the Canadian and US tax systems in order to obtain the best structure.

 

  1. Will and Trust planning when children already live in the US

When a beneficiary of a Canadian estate or trust resides in the United States, it’s critical to understand the income tax issues of the will and/or trust. Many particular provisions have been implemented into US tax law to combat the practice of utilizing offshore firms to dodge tax on US citizens. However, because these restrictions are frequently broad in scope, they can have an impact on otherwise innocent US individuals who are beneficiaries of Canadian trusts.

When naming a US resident as a beneficiary of a Canadian trust, it’s important to remember that money accumulated within the trust is taxed at much higher rates when it’s eventually transferred to a US taxpayer. Even capital distributions from a trust might be taxed as regular income in the United States if not properly reported. Information reporting and income inclusion must be properly timed to avoid needless taxation or double taxation of payments to US beneficiaries, which requires proper trust structuring.

Furthermore, if a US person is listed as the executor of a will or the trustee of a trust, the trust will be subject to additional US income tax reporting responsibilities, which can make estate planning more difficult. When creating an estate plan or administering an estate, Canadian people with US beneficiaries should seek experienced cross-border tax advice.

 

Final note for top 3 tax considerations

Moving to the US as a Canadian can unravel a world full of tax issues surprises. Not to mention the stacks and stacks of tax rules and guidelines that must be kept on top of your mind to ensure that your move to the US is fully compliant with both the US and Canadian tax laws. Need some advice with your taxes as a Canadian living in the US?

 

Get in touch with us!

US Tax – Here’s what you should know as a Canadian working in the US!

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US Tax - what to know as a Canadian working in the US

US Tax – Here’s what you should know as a Canadian working in the US

 

Do I pay Canadian tax on US income?

Cross border taxation can be extremely confusing, here’s what you should know as a Canadian working in the US!

Did you know that if you live and work outside of Canada for more than 183 days per year, the CRA considers you a “non-resident” of Canada for tax purposes?

According to the CRA, “non-residents” can only be taxed by Canada on income received from Canadian sources.

An example of this would be if you live and work in the US but have rental income in Canada. In this instance, you are required to pay Canadian income tax on the rental income you earned that year. If all your income came from outside of Canada and had no source of income within Canada, then filing of the Canadian Tax Return becomes optional.

 

Still a Canadian Resident but Receiving US Pay? Avoid double-taxation with the Federal Foreign Tax Credit. 

In the case of Canadian residents living and working in the US for under 183 days out of the year and had US taxes withheld from their pay, you are eligible for the Federal Foreign Tax Credit, which can help you obtain credit for any taxes collected by the IRS in the US.

Are you a self-employed or a full-time worker? Classification is vital here. 

Start by being clear. Knowing what your status is with the company employing or contracting you before you begin work will be helpful to avoid future issues. If you commute to work for a company located in the US, or if your company provides you with benefits and work equipment and controls specific aspects of your day-to-day, you are most likely a full-time employee of the company and cannot classify yourself as self-employed.

 

Navigating Compliance Shouldn’t be Difficult

Canadians earning income from US sources should always look to protect themselves from any potential liability and error. Ultimately, being aware of your options helps you stay on the right side of both the CRA and the IRS and avoid being taxed twice on your income as a sole proprietor or even a small business owner.

Residents of Canada must pay taxes to the CRA, and if you are residing in the United States, you will pay taxes to the IRS. Remember that there are nuances, such as the relationship to your employer and more.

If you need more information or help navigate this space, connect with us today – we can help make this process as seamless as possible, saving you time and money.

 

Get in touch with us today!

 

Get in Touch with us! - US and Canada Tax Preparer

Tax Considerations as a Canadian Working in the US

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tax considerations as a canadian working in the us 
Disclaimer: FAS Bookkeeping and Tax Services is providing this article as a public educational piece. 
Reference to any specific product or entity does not constitute an endorsement or recommendation by FAS Bookkeeping and Tax Services. 
FAS Bookkeeping and Tax Services will not be held liable for any damages incurred by using the specific products mentioned in the article.

Tax Considerations as a Canadian Working in the US

Planning on relocating to the US for new work opportunities? Or simply heading out for a work assignment that might take a few months? Before you do, make sure you understand the tax implications before you go. So here are some Tax Considerations as a Canadian Working in the US!

TAX STATUS

Before you leave the great white north, don’t forget to check up on your tax status as part of your tax considerations on your trip. The tax implications of a temporary or permanent work opportunity can be considerable and far-fetching.

Here are the tax considerations you need to know to avoid unnecessary headaches and be able to truly enjoy your time abroad.

RESIDENCY STATUS

According to the Canada Revenue Agency (CRA), your residency status determines your income tax obligations to Canada and you should be wary of this tax consideration as a Canadian working in the US.

Canadian residents are taxed on income they earn anywhere in the world, while non-residents are only taxed on income earned in Canada. If you spend time outside Canada but are still deemed a Canadian resident for tax purposes, you could owe federal and provincial or territorial tax on your worldwide income. This becomes confusing for some Canadians working in the US.

Establishing Canadian residency in the eyes of the government is less arduous than you might imagine. The CRA determines status on a case-by-case basis and will consider many factors in evaluating your Canadian residential ties, including whether you have a Canadian home, spouse or common-law partner, dependents, or personal property. The amount of time you spend in Canada and your intentions regarding future travel or permanent location, as well as whether you have Canadian bank accounts or a driver’s license can affect the agency’s decision.

 

Factual Resident or Deemed Resident?

The CRA classifies 2 types of residents.

A factual resident is someone who maintains ‘significant residential ties to Canada, even while abroad.

To visualize, let’s say you travel to Texas for a 6-month work contract, but spend the rest of the year in Calgary, and you keep your Canadian house and bank accounts, you could be considered by the CRA as a Factual Resident.

Deemed Residents on the other hand covers those who do not have ‘significant residential ties’ but are still considered as residents because:

  1. They are a ‘government employee, member of the Canadian Forces including overseas school staff, or working under a Canadian International Development Agency assistance program’ or a family member of ‘an individual who is in one of these situations’ or
  2. They ‘sojourned in Canada for 183 days or more in the tax year does not have significant ties with Canada, and are not considered a resident of another country under the terms of a tax treaty between Canada and that country.’

 

Non-resident for tax purposes

In general, non-residents are those who don’t maintain strong enough residential ties with Canada to be considered residents. If you spend fewer than 183 days in Canada during a tax year, or If you’ve severed residential ties, you might fall into this category.

Non-residents are still obligated to pay withholding tax on income from Canadian sources, including but not limited to the RRSP/RRIF withdrawals and other investment income.

If you are labeled as a non-resident, you could be liable for what they call the ‘departure tax’. This tax is calculated at your marginal rate on the taxable gains you would earn if you sold all of your Canadian assets.

If you’re a deemed or factual resident of Canada, but also considered as a resident of another country that has a tax treaty with Canada, you fall into the category of deemed non-resident. That means that you are obliged to follow the same tax rules as non-residents of Canada and all appurtenant rules indicated in the tax treaty.

 

U.S. Resident Formula

Canadians living and working in the U.S. for parts of a year might owe U.S. taxes. The ‘substantial presence’ test looks at how much time you’ve spent in the States over the past 3 years.

Here’s what you should know about it:

  1. Each day spent in the States in the current calendar year counts as 1 day.
  2. Each day spent in the States in the previous calendar year counts as 1/3 of a day.
  3. Each day spent in the States the before that counts as 1/6 of a day.

If added all together and you come up with 183 days or more, and if you’ve spent at least 31 days in the U.S. in the current year. It means that you’ll be deemed a U.S. resident for tax purposes and you are taxed on your worldwide income.

Lucky for you, the U.S. and Canada has a tax treaty in place. You may be able to use foreign tax credits to reduce or eliminate double taxation.

Taking the time to research the tax considerations before you head abroad can provide you with an accurate understanding of your tax status. However, tax compliance is a bit tricky no matter how much time you spend researching your tax liabilities. It is best to consult a professional for tax-related matters especially if it includes going abroad. It’s a great thing that we are here to help you navigate your international tax compliance. Let our experienced Enrolled Agent help you with what you need to know!

 

Get in touch with us today!

 

Disclaimer: FAS Bookkeeping and Tax Services is providing this article as a public educational piece. 
Reference to any specific product or entity does not constitute an endorsement or recommendation by FAS Bookkeeping and Tax Services. 
FAS Bookkeeping and Tax Services will not be held liable for any damages incurred by using the specific products mentioned in the article.

 

 

 

Is your Inherited IRA Taxable in Canada?

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Inherited IRA Taxable in Canada

First things first, what is an Inherited IRA?

An inherited IRA is an account that is conceived when someone inherits an IRA or an employer-sponsored retirement plan after the death of the original owner. The person (beneficiary) who inherits an IRA can be anyone: spouse, relative, or unrelated party or entity (inheritance or trust). So, we’ve got that covered!

 

Now, the question is, if I am currently residing in Canada and I receive an Inherited IRA or other foreign pensions from a deceased American relative will it be taxed?

The short answer is yes. If you receive an Inherited IRA from a relative who has been a US resident prior to their death your Inherited IRA will be taxable in Canada.

The reason for this is that Canadian Tax laws have a provision regarding the taxation of “Foreign Retirement Arrangements”. It means that the CRA has the right to tax your Inherited IRA. If your case is that the US withheld taxes coming from your Inherited IRA, then you will be able to claim foreign tax credit. However, there are limits on what you can claim as a foreign tax credit based on what is stated in the US-Canada Tax Treaty.

There are actually two instances that the legality of this taxation practice was presented before Canadian Tax Courts. In one instance, the appellant requested an alternative method of taxing the Inherited IRA and that outright taxing the Inherited IRA in Canada will result in double taxation. The appeal was rejected for both arguments.

In another instance, the appellant did not declare his Inherited IRA to the CRA and was then charged with penalties.  His argument was that the Inherited IRA was not taxable. His motion was rejected as well.

For both instances, the court decided that the CRA was well within its legal scope to collect taxes from Inherited IRAs. It is important that you declare your Inherited IRA or any other foreign pension inheritance to avoid coming to court and facing hefty penalties.

Cross-border taxes are confusing, but it doesn’t have to be! Get in touch with us today and we’ll help you navigate the confusing world of cross-border taxes!

FBAR Explained for Canadians working in the US

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FBAR Explained

FBAR stands for “Report of Foreign Bank and Financial Accounts.”

The US gave its Department of Treasury the authority to establish record-keeping and financial reporting policies for Citizens and Residents situated in the US for a certain amount of time. The purpose of the FBAR is to provide investigators with a crumb trail to make it easier to track down and prosecute criminal activity relating to finances. The FBAR has been proven valuable in providing intelligence and counterintelligence information to protect the US against economic sabotage and international terrorism.

Record Keeping

FBAR records must be kept for five years from the due date of the report (June 30 of the following year). Failure to keep the following records can result in the application of penalties by the IRS.

  • Name maintained on each account.
  • Number or other designation of the account.
  • Name and address of the foreign bank or another person with whom the account is maintained.
  • Type of account.
  • The maximum value of each account during the reporting period.

 

Who must file the FBAR?

FBAR Explained

If you are a Canadian citizen residing in the US for work then you are obligated to file an FBAR.

The list of Foreign financial accounts that must be reported are the following:

  • Bank accounts such as savings accounts, checking accounts, and time deposits.
  • Securities accounts such as mutual funds, brokerage accounts, and securities derivatives, or other financial instruments accounts.
  • Accounts where the assets are held in a commingled fund that is a mutual fund.
  • Any other account/s maintained in a foreign financial institution or with a person doing business as a financial institution.

If you are not quite sure if you need to file an FBAR, contact us today!

What is the US-Canada Tax Treaty?

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What is the US Canada Tax Treaty

What is the US-CANADA Tax Treaty?

The current Canada-United States Income Tax Agreement was first established in 1980 and had five major amendments or “agreements” that have been passed on different occasions. The latest one being the Fifth Protocol contains important changes that may change the way Canada & the United States interpret tax laws.

In summary, the US Canada Tax Treaty was established to prevent tax issues from springing up for American Citizens and Residents living in Canada and vice versa. Since the US is one of the very few countries in the world that imposes taxes based on citizenship, double taxation is seen as a problem that happens a lot.

US-Canada Tax Treaty

The US already has certain policies set in place to prevent double taxation from happening to its citizens living abroad like the Foreign Earned Income Exclusion & the Foreign Tax Credit. However, the policies set in place are not enough to cover specific problems that arise for Americans living and working in Canada hence the birth of the US – Canada Tax Treaty.

 

Since its inception in 1980, plenty of protocol changes were made to keep it updated with the changing times.

 

Here are some of the latest notable changes that were made in the Treaty:

 

  • Withholding tax on interest payments removed. – The 10% withholding tax rate that previously applied to interest payments between unrelated parties has been removed.

 

  • “Mandatory” arbitration. – Currently, countries are not obligated to participate in an arbitration in instances where there is a possibility of double taxation. Under the new rules, if an agreement can’t be reached, concerned countries must conduct an arbitration.

 

  • “Departure Tax” – The departure tax eliminates the possibility of capital gains double taxation. Based on the current rules, persons leaving Canada must report capital gains and losses arising from their “deemed disposition” when leaving the country. Based on the new regulations, taxpayers can choose to realize their gains before becoming a US resident so the US will only tax the change in value from the date of entry.

 

  • RRSP & IRA – In this change, cross-border workers can deduct contributions to pension plans conducted abroad in their country of residence. This means that if you’re a Canadian working in the US that contributes to the US retirement plan, then the RRSP contribution can be deducted within the space limit when you return to Canada.

 

The field of taxes has a steep learning curve, doing it across the border is a whole other level of difficulty! But you don’t need to worry, our team of expert and experienced Cross Border Tax Specialists can help you!

 

Send us a message today and we’ll help you find a tax solution that works for you.

US and Canada Cross Border Tax Frequently Asked Questions

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What is the US Canada Tax Treaty

Frequently Asked Questions of US Citizen Living/Working in Canada

  • Do I still have to file and pay US taxes?

If you are still a US Citizen, YES.

The US have citizenship-based taxation system which means that if you are an American citizen, no matter where you are, you must file US tax returns and pay taxes. Even If you are living abroad, the same tax rules apply to you regarding income taxation as the people living in the US.

  • What are my Canadian tax obligations?

Your Canadian tax obligation is based on your residency status in Canada.

The CRA provides guidance so you can determine what your current residency status is and from there, you can see the list of your tax obligations. It will depend on whether you live in Canada permanently or temporarily and your significant residential ties in Canada.

See the CRA guideline here.

  • What are the common tax forms I need to prepare and file for my US taxes while living in Canada?

Here are some of the common forms to be filed:

  • Form 1040, U.S. Individual Income Tax Return, and its related schedules.
  • Form 2555, Foreign Earned Income Exclusion.
  • Form 1116, Foreign Tax Credit.
  • Form 8938, Specified Foreign Financial Assets.
  • Form 8621, Passive Foreign Investment Corporations (reports interest in Canadian mutual funds).
  • Form 8833, Treaty Based Position Disclosure (for various Canada–U.S. Income Tax Treaty elections that may be required in your U.S tax return)
  • FinCen Report 114, Report of Foreign Bank and Financial Accounts (previously Form TDF 90-22.1)

Depending on other factors such as foreign trusts or foreign gifts, you may need to file additional forms. Make sure you work with a professional cross border tax specialist so you won’t miss a form to be filed.

  • Do I need to report my non-US bank accounts on my US tax return?

Every year, under the law known as the Bank Secrecy Act, you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.

A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

– a financial interest in or signature or other authority over at least one financial account located outside the United States if;

– The aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

  • I have a rental property in Canada. Do I need to report this on my US tax return?

If you rent out a foreign property, you need to report it just like you would with a US rental. Foreign rental expenses need to be reported in USD. You also need to know how many days you either rented out your property or lived in it to figure out the tax treatment.

 

Frequently Asked Questions of Canadian Citizen Living/Working in US

  • Do I have to file and pay CA taxes?

Canadian tax obligation is based on your residency status in Canada.

The CRA provides guidance so you can determine what your current residency status is and from there, you can see the list of your tax obligations. It will depend on whether you live in or leave from Canada permanently or temporarily and your significant residential ties in Canada.

See the CRA guideline here.

  • What are my US tax obligations?

The first step you need to do to know your US tax obligation is to determine your Alien Tax Status.

If you are not a U.S. citizen, you are considered as a nonresident alien unless you meet one of two tests: the green card test or the substantial presence test for the calendar year (January 1 – December 31).

If you meet either test, you are considered a U.S. resident alien and are generally taxed in the same way as U.S. citizens. If you do not meet either the Green Card Test or the Substantial Presence Test, then you are a nonresident alien which are generally subject to U.S. income tax only on their U.S. source income.

  • I have a rental property in the US. Do I need to report this on my Canadian tax return?

As a Canadian resident, you are subject to tax on your worldwide income regardless of where it is earned. This means your U.S. rental income should be reported on your Canadian income tax return.

Also, if the total cost of your non-Canadian assets is more than $100,000 in the year, you may have to complete and file Form T1135, Foreign Income Verification Statement.

 

Need help with your US and Canada Cross-Border Taxes? Contact FAS Bookkeeping and Tax Services today at admin@fas-accountingsolutions.com or at 713-855-8035!

Things You Should Know About US Expat Taxes Part 3

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Things You Should Know About US Expat Taxes

Understanding tax code alone is already an intimidating task, add being a US Expat in the mix, and it becomes even more complex and confusing. To avoid committing mistakes or missing deadlines and forms to file, follow our series of blogs where we discuss important things expats should keep in mind!

Missed Part 1 and 2? Here are the links to it: Things You Should Know About US Expat Taxes Part 1 and Things You Should Know About US Expat Taxes Part 2

  1. Know If You Must Report Foreign Bank and Financial Accounts

Things You Should Know About US Expat Taxes

Every year, under the law known as the Bank Secrecy Act, you must report certain foreign financial accounts, such as bank accounts, brokerage accounts and mutual funds, to the Treasury Department and keep certain records of those accounts. You report the accounts by filing a Report of Foreign Bank and Financial Accounts (FBAR) on FinCEN Form 114.

A United States person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report:

  • a financial interest in or signature or other authority over at least one financial account located outside the United States if
  • the aggregate value of those foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

There are exceptions, so be sure to check those out.

Source: https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

 

  1. The FBAR Deadline Falls on Tax Day

Things You Should Know About US Expat Taxes

The last blog had fully explained if you need to report your Foreign Bank and Financial Accounts (FBAR). Keep in mind that FBAR is an annual report, due April 15 following the calendar year reported.

You’re allowed an automatic extension to October 15 if you fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.

If you are affected by a natural disaster, the government may further extend your FBAR due date.

Source: https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar

 

  1. You May Need to File FATCA Form 8938

Things You Should Know About US Expat Taxes

Foreign Account Tax Compliance Act (FATCA) is similar to FBAR in that it is intended to prevent US taxpayers from hiding money in offshore accounts and assets.

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS generally using Form 8938, Statement of Specified Foreign Financial Assets. This form must be must be attached to the taxpayer’s annual tax return.

If you are required to file Form 8938, you must report your financial accounts maintained by a foreign financial institution.  Examples of financial accounts include: Savings, deposit, checking, and brokerage accounts held with a bank or broker-dealer.

Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000. Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent. Criminal penalties may also apply.

Source: https://www.irs.gov/businesses/corporations/fatca-information-for-individuals

 

If you are an expat and need help with your taxes, our Enrolled Agent can help you! Contact us today at admin@fas-accountingsolutions.com or at 713-855-8035.

Things You Should Know About US Expat Taxes

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