US citizens are taxed on their worldwide income and are required to file US expat taxes if their income exceeds the federal filing threshold, even with income from anywhere in the world. However, there have been numerous US citizens who have moved abroad and assumed that their lack of US-source income meant that they didn’t have to report or pay US expat taxes to the US government. This couldn’t be more wrong. Because of the many US citizens who have made this costly assumption, the US government has made various attempts to help expatriates become compliant with their US expat taxes and FBAR reports. The effort currently in place is called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) and is available until August 31, 2011, or later with an approved extension.
What Is The Offshore Voluntary Disclosure Initiative?
US citizens who have authority over foreign financial accounts whose cumulative balances exceed $10,000 USD at any one point in the tax year must file a Report of Foreign Bank and Financial Accounts (FBAR), Treasury Department Form TD F 90-22.1. Failing to file this form properly can result in stiff penalties and even criminal prosecution!
The 2011 OVDI provides US Expat Taxpayers who have failed to comply with FBAR filing requirements the opportunity to do so with reduced penalties. The IRS offered a similar program in 2009, with great success. Although the 2011 program has more rigid requirements and less of a penalty reduction, it still provides a “way out” for US citizens who want to become compliant, but fear the consequences. More information about FBAR filing requirements can be found in our ”US Expat Taxes Explained” series.
Who Is the Offshore Voluntary Disclosure Initiative For?
The 2011 OVDI is for any US taxpayer who is out of compliance with their FBAR filing requirements. Of course, as with nearly every piece of US expat tax law, there are exceptions to this. The 2011 OVDI is not for:
- Taxpayers whose returns are currently under examination by the IRS,
- Taxpayers who have already been notified by the IRS that they are not in compliance, or
- Taxpayers who have reported and paid all of their US expat tax, unaware of their FBAR filing requirements (these taxpayers can simply file the outstanding FBAR reports, attaching a statement explaining their reasons for not filing),
The 2011 is for:
- US expat taxpayers who have knowingly failed to file an FBAR,
- Taxpayers who want to voluntarily want to become compliant with IRS tax reporting requirements
Many taxpayers facing compliance issues are concerned about the hefty US expat tax liabilities requiring immediate payment. While this concern will not go away, it’s important to note that the IRS can and will establish installment agreements and other forms of debt settlement for taxpayers. Being proactive and voluntarily disclosing your US expat tax liability will work in your favor when attempting to establish payment arrangements with the IRS. If you are unable to pay at this time, and can prove this situation to the IRS, you may even be eligible for debt forgiveness or penalty relief.
How Does the Offshore Voluntary Disclosure program work?
- FBAR penalty (50% of the total aggregate value of all of your foreign accounts)
- Failure to File and Failure to Pay penalties (approximately 25% of the unpaid income tax — read more about these penalties in our ”US Expat Taxes Explained” series)
- Accuracy Related penalty (20% of the income tax associated with the foreign accounts)
It’s important to note that the IRS takes the reporting requirements for FBARs and other informational returns (5471, 5472, 3520, etc) very seriously. If a US expat taxpayer is found to have fraudulently and intentionally failed to file their FBAR, the IRS can assess a 75% fraud penalty as well as pursue criminal prosecution. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
For example, in 2007, Edward Expat has $5,000 in a Swiss bank account, $6,000 in a British bank account and $2,000 in a German bank account. The cumulative balances of these accounts total $13,000, so he is required to file an FBAR by June 30, 2008. By failing to do so, he incurs a 50% FBAR penalty of $6,500 ($13,000 * 50%). These accounts also earned $500 in interest income, and can incur an additional $225 in Accuracy Related, Failure to File and Failure to Pay penalties. Failing to report these bank accounts and their associated income can cost Edward $6,825!!
If we assume that Edward held the same account balances in 2008 and 2009, yet failed to report this information to the IRS via his US Expat Taxes, he could be faced with a significant balance due to the IRS. However, by taking advantage of the 2011 OVDI before August 31, 2011, he can become compliant on all of his reporting requirements with significantly reduced penalties. The IRS has also recently announced the opportunity to extend this deadline by 90 days with proper communication. Under the 2011 OVDI, the penalties are calculated at either 5%, 12.5% or 25% of the highest year’s cumulative account balance. Taxpayers eligible for a 5% penalty must have not opened the account themselves, had “minimal” interaction with the account, and never withdrew more than $1,000 in one year. If the highest cumulative balance is less than $75,000, the US Expat Taxpayer will be eligible for the 12.5% penalty rate. All other taxpayers are subject to the 25% penalty. In Edward’s case, the highest year’s cumulative account balance was $14,500 in 2009, putting him at the 12.5% penalty rate.
Rather than paying an FBAR penalty of 50% for each year, under the 2011 OVDI, Edward will only pay 12.5% on the highest year, which is $1,813 ($14,500 * 12.5%). He will also owe the accuracy related, failure to file and failure to pay penalties on the under-reported interest income for each year.
What Do I Need to Do?
- Preparing and filing amended US expat tax returns for any years between 2003 and 2010 covered under the 2011 OVDI. The returns should be amended to include any income previously omitted, particularly the foreign earned income.
- Filing all information returns (FBAR, 5471, 3520, etc) not previously reported.
- Paying all penalties associated with under-reported income (including accuracy related, failure to file, and failure to pay).
- Paying the 5%, 12.5% or 25% FBAR penalty on the covered tax year with the highest cumulative balance.
If the taxpayer cannot afford to pay all of his or her US expat tax liability, he or she should make a good faith arrangement with the IRS to commit to paying these taxes in the near future. Taxpayers participating in the 2011 OVDI will also be asked to cooperate with the IRS, if requested, to provide information on offshore financial accounts, institutions and facilitators.
Why Should I Get Compliant with my US expat taxes and FBAR?
“Tax secrecy continues to erode,” IRS Commissioner Doug Shulman said. “We are not letting up on international tax issues, and more is in the works. For those hiding cash or assets offshore, the time to come in is now. The risk of being caught will only increase.”
By voluntarily reporting offshore accounts under the 2011 OVDI, US Expat Taxpayers have an opportunity to pay substantially less in penalties than if they were discovered through IRS examination. Taxpayers participating in the 2011 OVDI can become compliant with US Expat Tax requirements, avoid potential prison time and resolve any outstanding tax concerns. After the 2009 disclosure initiative, the IRS received a great deal of information regarding offshore accounts and institutions. The 2011 initiative is proving to be equally fruitful for the IRS, and the chances of undisclosed financial accounts being discovered increases with each year. Becoming compliant with US Expat Tax filing requirements now is highly recommended. More information about the 2011 OVDI and its impact on US Expat Taxes can be found on the IRS website.
UPDATE: The deadline has been extended to September 9th, 2011!
What forms do I need to start this process. Do I need a 1040? a 2555? What about the quiet disclosure clause for not meeting the deadline. If I have made under the $91,500 amount, will I still owe penalties? Can my wife and I file jointly? Thank you for your help. Mark
Hi Mark,
You will need to complete form 1040 (same form as you would in the US), form 2555 (Foreign Earned Income Exclusion), and form 1116 (Foreign Tax Credit). You may also need to file certain schedules depending on your personal circumstances. You can find more information here.
If the IRS knows you are in the process of filing under the Offshore Voluntary Disclosure Initiative, they will offer you an extension. If you have made under the $91,500 amount, you will not owe underpayment or interest, but first you need to make sure you qualify as an expat to be eligible for these exclusions. You may also owe penalties for foreign bank accounts (FBAR) if they have totaled an amount over $10,000 at any given time. We can work through this with you.
You and your wife can file jointly, but you should evaluate your filing status to see which is the most cost effective for your particular situation – the different regulations to expat taxes complicate this subject a bit.
We would be happy to help you get compliant with the IRS! If you would like to get started, just contact us. We are also hear to any questions about US expat taxes you may have.
Sincerely,
The Greenback Team
Hi…can you please explain what does “:Non-compliant funds” mean?
if I purchased real estate with home loan in a foreign country (100% paid by the bank) and paid the mortgage by transferring after tax US funds to my bank in foreign country (which is unreported) do i have to include the value in 25% penalty calculation? my interest income in foreign back is <$100
Hi A,
“Non-compliant funds” is regarding unreported monies in foreign countries.
If your account or sum of accounts has had a balance of $10,000 or more to pay your mortgage, then yes, it must be reported and may be included in your penalty calculations. For some circumstances, the IRS will work with you. Since you paid taxes on the money in the US, they may be more forgiving, but it will depend on your specific situation.
Please don’t hesitate to ask any more questions about your US expat taxes!
Sincerely,
The Greenback Team
http://www.greenbacktaxservices.com
if i haven’t had over $10,00 in my bank account at any time do i still have to file?
Hi Lynn,
If you are referring to submitting the FBAR, you will not need to send it to The Treasury Department if you have not had $10,000 or more in all of your bank accounts. So, if you have three accounts overseas with $4,000 in each, you will need to file all of them as the collective balance is $12,000.
If you are referring on whether or not you need to file your taxes, this is a complete different ball game. All US Citizens and Green Card holders are required to file a US Federal Income Tax return each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels.
The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
Contact us if you have any more questions about your US expat taxes!
Hi, If I am H1B do I still need to disclose offshore accounts ??
Thanks
Reddy
Hi,
As of now, only “United States people” must file, which is identified on the IRS website as:
A citizen or resident of the United States.
A domestic partnership.
A domestic corporation.
A domestic trust or estate.
So, unless you have residency under your H1B, you do not need to file the FBAR. You do, however, need to maintain your tax returns for the years you have worked in the US.
If you have any more questions about your US expat taxes, please don’t hesitate to contact us!
Sincerely,
The Greenback Team
http://www.greenbacktaxservices.com
Hi,
I am an H1B holder in US for almost 10 years(with 2005 & 2009 completely in India). Till 2006, I worked for an indian software company and they give onsite as well as offshore salary. I paid the taxes to IRS for the salary recieved in US and paid taxes to the Indian government for the salary paid in India. Only in 2010, my foriegn bank account went above 10,000 dollar. My foriegn account(it has majority of the money from my offshore salary which was taxed by indian government)recieved interest less than 20 dollars every year that I did not report. So do I need to amend all my previously submitted 1040s and include the foriegn income interest of 20 dollars along with filing the FBAR? I know I missed the June 30 dead line for filing the FBAR for 2010. Thank you very much for your reply in advance.
Hello,
As a non-citizen or resident, you are not required to report your foreign earned income or your foreign bank accounts to the US government. As long as you paid your taxes to the US for the salary you were paid in the US, you are not delinquent with the IRS or Treasury Department unless you are a US citizen or permanent resident.
If you have any other questions about US expat taxes, please do not hesitate to ask! You can contact us directly at info@greenbacktaxservices.com.
Hi,
Does a H1 visa holder filing taxes as US resident need to declare foreign income or is it only a GreenCard holder or US citizen that have to declare foreign income? Does a H1-Visa holder filing taxes as US resident need to show foreign earned income?
thanks!
Hi Gita,
It sounds like you are a resident alien. Resident aliens are taxed in the same manner as a US citizen. This means that you must report worldwide earnings on your US tax return, but will be eligible for the Foreign Earned Income Exclusion and Foreign Tax Credit as other taxpayers are. If you have any questions about your US expat taxes or need assistance with preparations, please do not hesitate to contact us.
Sincerely,
Josh Huber
Hi,
I am a Canadian, born here and never lived anywhere else but my mother is an American who has lived in Canada since the 70′s. I recently heard that in some circumstances just having one US born parent is enough to have to file with the IRS. Wow! That was news to me. What do you know about this? Thank-you very much for your reply in advance.
Hi Heidi,
We understand that you did not know that you need to file your US expat taxes – don’t worry! This situation is quite common, and one we have a great deal of experience with.
Typically, the IRS is going to ask for 6-8 years of back taxes, but you would need to work with our tax experts to identify exactly how many years you need to file. Please note that you probably won’t owe anything after US-Canadian tax treaties are reviewed, Foreign Earned Income Exclusions are taken into consideration and Foreign Tax Credits are applied.
You are also going to need to report any bank or financial accounts you have outside of the US through an FBAR. If your accounts have totaled more than $10,000 USD at any given time during a year, you must turn in the FBAR to The Treasury Department.
If you have any questions regarding your US expat taxes or would like help with preparations, please let us know!
Our fees for tax preparation services are $329 for the first year, then discounted by $279 for each additional year. For FBAR preparation, we charge $50 for 30 minutes of preparation. If you would like to get started, click here!
I am a U.S. Citizen living in Canada with a Canadian spouse for last 4 years. I just heard about the voluntary disclosure today on Canadian radio. Tomorrow is the cut off.
We have joint bank accounts but my spouse has been our sole family wage earner up until this year. I was in school up until now.
Am I correct in understanding that I do not have to file this form but do have to begin filing taxes when my income exceeds $3650?
Hi Karl,
All US Citizens and Green Card holders are required to file US expat taxes each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels. The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
You are going to need to file your bank accounts if the balances of them all, collectively, have exceeded $10,000. You file these through the FBAR, which is turned into The Treasury Department.
If you have any more questions about your taxes or would like to have us prepare your returns and FBARs, please let us know!
I am a dual US/ Canadian citizen, and just found out that I’m supposed to be filing tax returns in the States. Given that I’ve never lived (since age 2) or worked in the US, and don’t even have a social security number, does this OVDI apply to me? I do, however, have a US passport.
Thanks,
Hi Byron,
All US Citizens and Green Card holders are required to file US expat taxes each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels. The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
For your FBARs, you are going to need to file with The Treasury Department if you have, collectively, $10,000 or more in non-US accounts. The OVDI deadline is today, so it is unlikely you will be able to take advantage of it. Many people who thought they would have applied did not, so don’t feel like you have missed the boat. Either way, it is best to get compliant as soon as possible to avoid higher penalties and accruing interest.
If you have any other questions about the FBAR or your US expat taxes, please let us know!
Sincerely,
The Greenback Team
Hi,
I am in the same situation as Karl and Byron being a dual us/canada citizen. i understand now that i should have been filing my us income tax, and that very likely my tax owing to the irs would be zero…however my real concern is the OVDI and my savings and investments.
All of them are in my name for my own personal use, and have been disclosed to the CRA for tax purposes here in Canada. My understanding with the OVDI is that it is to crack down on offshore tax evasion schemes. However, my accounts have not been sourced with any US income, they were established with canadian funds, in canada, in my name, subject to canadian government regulations. I dont understand why I should be worried about having to pay any penalties since my failure to report to the IRS was done in good faith that I did not know, and now I am willing to be compliant.
Hi Krisjan,
Even though your money in your accounts may have never crossed through the US in any way, it must be filed because you are a citizen. You need not pay any penalties if you file your appropriate forms with The Treasury Department and become compliant. By doing so, you face less penalties than you would if the IRS were to find you on their own.
If you have any other questions, please feel free to contact us at info@greenbacktaxservices.com.
Kindest Regards,
The Greenback Team
I am a dual citizen living in Canada. I’m originally a Canadian who acquired American citizenship in 2000 prior to leaving the US after living there for 10 years (1990-2000). I did not know about this law until now and have not had time to fill out this form. I have not filed US tax returns since being back in Canada (10 years) and am unsure as to how to proceed with this. Am I liable to the US government for taxes on income earned in Canada for the last ten years?
Hi Martin,
Thanks for contacting us with your question about US expat taxes. All US Citizens and Green Card holders are required to file a US Federal Income Tax return each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels. The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
The IRS will typically ask for 6-8 years of prior year tax returns. We can help you prepare your return for $329, including all schedules and forms. We will prepare additional years for you at a reduced rate of $279/year. Please contact us if you have any questions or would like to get started on your returns!
If you have any other questions about your US expat taxes, please don’t hesitate to contact us.
Sincerely,
The Greenback Team
http://www.greenbacktaxservices.com
Hi,
I have dual US / Canadian citizenship. I moved to Canada when I was 7. I worked in the US for ~1 1/2 years in ’96 and ’97. Then briefly worked in Canada before moving to New Zealand for 4 1/2 years. I have now lived and worked in Canada since 2004. I have always paid my Canadian taxes but did not know that I had to file in the U.S. (except when I lived there). I am not expecting that I will have to pay any actual taxes due to our higher tax rate, but I am very concerned about the 25% “penalty” I am reading about (I had one year when my income was over $75,000). Can you please advise me whether or not this penalty applies in this situation. Also I did not find out about the voluntary disclosure initiatve in time and I have missed the deadline which passed yesterday. Can I still apply? And if so, how do I go about doing this.
Hi Katrina,
Thanks for contacting us regarding your question about US expat taxes..
All US Citizens and Green Card holders are required to file a US Federal Income Tax return each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels. The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
Typically, you will be asked to file 6-8 years of previous returns. You will be subject to underpayment and interest on underpayment, but the 25% penalty is only for undisclosed bank accounts. Unfortunately, it is too late to take advantage of The Offshore Voluntary Disclosure Initiative. Eitherway, it is best to get started on your delinquent returns immediately to avoid increasing interest from the IRS.
If you have any questions about your US expat taxes or would like to get started on a return, please contact us.
Sincerely,
The Greenback Team
Hi! If I made under the $3650 and have not had $10,000 or over in my bank accounts do I still need to file for the 2003 -2010 the IRS is asking for? Also if my mom has been on Canada Pension for those years does she have to file?
Hi Tammy,
Thanks for contacting us with your question about US expat taxes..
All US Citizens and Green Card holders are required to file a US Federal Income Tax return each year if their income is over the minimum threshold. It doesn’t matter where you earn your income or whether you have filed in your country of residence as well; you are required to file in the US if your income is above these levels. The thresholds are currently:
Single with income over $9,350
Married filing jointly with income over $18,700
Married filing separately with income over $3,650
Pensions are included as a part of of income, thus must be reported.
If you have any other questions regarding your US expat taxes or would like us to get started on you or your mother’s returns, please contact us.
Sincerely,
The Greenback Team
I only found out recently that I need to complete the US tax forms. I am a dual citizen. I see that OVDI deadline is already passed. Can I still participate in this? Also I was looking at the OVDI letter and they need passport number. Are they asking for US or Canadian passport? I used to file when I lived in US and a year after that. However have not filed US Taxes since then. For how many years back, I need to file now
Hi Asha,
Unfortunately, it is too late for you to take advantage of the OVDI as the deadline has already passed. However, if you explain your situation to the IRS with a cover letter, they may be more lenient regarding penalties. For delinquent filers, the IRS typically will ask for 6 to 8 years of back taxes, however we would need to work with you and your specific situation to identify how many years you would need to file.
If you would like to get started, just contact us!
Sincerely,
The Greenback Team
Hello,
Like Asha, I live in US with green card. I just found out about OVDI. I have been filing tax returns in other country where I earned income. Do I have still have to file taxes in US for the money earned in other country? Is there penalty associated with that?
Thank you.
Hi Nilesh,
The IRS requires that US citizens or Greencard holders file US expat taxes if their income is above the minimum thresholds, even if you have also filed in a different country. The IRS does have penalties in place for Failure to File and Failure to pay, though they are not always imposed. You will be liable for interest on any underpayment of taxes you owe to the IRS. If you have any questions regarding your expatriate tax return, feel free to contact us.
Sincerely,
The Greenback Team
Hello,
I am on H1B Visa, I came to US on work in 2008 and have been sending money to my personnel account for my family back in India above $10000 each year from then. Do I need to report this to IRS? I just got to know about OVDI.
Thanks
Hi Sai,
If you hold a Greencard or are a permanent citizen, you will need to report your accounts in India if their value is over $10,000.
Another bit of information; OVDI has expired, and the IRS has not mentioned any plans to set up another disclosure period.
If you have any questions about your FBAR filing requirements, please do not hesitate to contact us.
Sincerely,
The Greenback Team
Hello…
I have a question on FBAR…
I am trying to understand this wording on irs.gov…
“The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.”
Does this mean maintaining the balance of $10,000 in all foreign accounts but not necessarily the total transfer amount? Right?
For example, I have transferred more than $10,000 to my overseas account but never maintained more than $10,000 as balance. How this works?
Thanks in advance…
Hi Sreenu,
For your FBAR, you will need to report all of your accounts overseas if the balances, when added together, exceeded $10,000 even for one day. So, even if you were just transferring money from your US account to, say, buy a car in cash, you would still need to file an FBAR to report that account and all accounts overseas since their cumulative balances was, at one given point over the year, over $10,000.
If you have any other questions about your FBAR filing requirements, we are happy to help!
Sincerely,
The Greenback Team
Hi The Greenback Team,
Thanks for your response.
How about if I transfer money to a friend’s account that exceeds $10,000, do I need to file FBAR to report that as well?
Thanks,
Sreenu
Hi Sreenu,
You are going to need to report any bank account you had financial interest in (including joint accounts with non-residents or signature authority on business accounts) if their total balances is higher than $10,000. So, if your name is on the friend’s account as a joint account, the account would need to be included on the FBAR report.
Please let us know if you have more questions!
Sincerely,
The Greenback Team
I just learned about FBAR from my collegues and had couple of questions
I am from India and often travel to US for my work on H1b. In last few years below is my residential status in US
1. 2007 – Non Resident Alien
2. 2008 – Resident Alien
3. 2009 – Non Resident Alien
4. 2010 – Resident Alien
5. 2011 – Resident Alien
Please let me know for which years i need to submit the FBAR. In all of the above years the income earned in India doesnot qualify for any additional tax in US. Can i submit all years FBAR by June 30, 2012 ? I am relocating back to India mid this year. Is there is a necessity to submit FBAR every year even if i don’t visit US.
Hi Chandru,
Thank you for comment. You are going to need to file an FBAR for every year that you had a green card and your bank accounts outside of the United States were higher than the $10,000 threshold. You should submit all of your delinquent FBARs as soon as you can to avoid higher penalties. If you file these delinquent FBARs, you will also need to file any delinquent US expat tax returns in order to qualify for the reduced penalties.
You could still be persecuted by the IRS agents focusing on finding individuals who should have reported their foreign bank accounts but failed to do so. They can and will fine you up to 50% of the highest balances of your accounts, $50,000 for each violation, could press criminal charges that result in jail time or a combination of the three. It is best to come forward under this Offshore Voluntary Disclosure Program in order to ensure you have no obligations left with the US authorities when you return to India.
If you have any questions or need assistance with your preparations, please do not hesitate to contact us.
Sincerely,
The Greenback Team
Hello,
I am US citizen married to an non-american. We moved one of his non-US accounts off-shore and made it joint. I have been filing FBAR on all my personal foreign account for the last years. Now I must add this one too, right? And what about reporting to the IRS?
Hi Monica,
Thanks for your comment. You are correct in your assumption that you will need to file an FBAR for your joint bank account located overseas. The report to the IRS is Form 8938. Unlike the FBAR, this is submitted with your US expat tax return when you file.
The thresholds for Form 8938 are much higher than the threshold for the FBAR. If you are married and living overseas, the threshold is $400,000 at the end of the year or $600,000 at any given time in the year. If you are residing in the United States, these thresholds are $100,000 at the end of the year or $150,000 at any given time in the tax year. This is a new reporting requirement that will first be reported on you 2011 US expat tax return.
If you have any questions about your US expat taxes or need help with your preparations, please do not hesitate to contact us!
Sincerely,
The Greenback Team
Hello,
I am a U.S. citizen married to a non-american and living overseas. We file as married jointly, but my wife does not have a green card and we have never lived in the U.S. My wife has bank accounts in her home country that are in her name only. Do we need to include these on the FBAR?
Hi Tom,
Thank you for contacting Greenback with your FBAR question. Because you included your wife on your tax return, one of our expat CPA’s suggested that you also include these accounts on your FBAR report. If you were to file as married-filing separately, you would not need to report this income. Should you have any other questions about your FBAR’s or filing status, please do not hesitate to contact our expat CPA team.
Sincerely,
The Greenback Team
Greenback Team,
The reason I ask this is that not knowing about it, we have never filed a FBAR. Since living overseas, all of my accounts overseas added together have never reached $10000. We got married 5 years ago and if we have to consider her accounts for the FBAR, again of which are in her name only, then every year since we’ve been married we’d be over the $10000.
Given this is the situation, what do we need to do? And after filling as married-jointly already can we from this year file as married filing seperately?
Hi Tom,
Given your situation, you have two options. You could amend your previous years returns and file as married – separately, leaving your wife out of your US tax situation completely. Her income would not be taxable and you would be able to avoid filing the FBAR for the last five years. If you would rather not, you can file the FBAR for the five years that you have been married, but note that the Treasury does have penalties for filing late. They can be up to 50% of the highest balance of each year, though right now there is the Offshore Voluntary Disclosure Program. This allows people like you to come forward and face reduced penalties (5%-25% of highest balance).
We can gladly help you handle your amended returns should you need assistance.
Sincerely,
The Greenback Team
Greenback Team,
Sorry for asking so many questions, but thank you. One more – I thought it was not allowed to amend your filing status from married jointly to married filing separately. Isn’t that right?
Hi Tom,
I can see the error – you are correct in that you cannot change from a joint to separate return after the due date. You can, however, opt to do this moving forward (i.e. this year’s tax return). That being said, you would be best to file the necessary FBARs under the OVDP to avoid higher penalties on the unreported bank accounts.
Sincerely,
The Greenback Team
Hello,
We are both U.S. citizens living in the U.S. Many years ago we lived for a short time (less than 2 years)in Sweden. We filed tax returns every year. If my husband still has a private pension account over there (we will research that and find our records of it) and it exceeds $10,000 in value, what do we do? I don’t think he can withdraw from it until retirement age. I don’t think we have any control over how toe money is invested so, does it still count as a foreign account? It looks like we missed the “grace” period for declaring it but we never even heard of this! Will the IRS come after our assets in the U.S. based on some assets we forgot about in Sweden? (I think the value would be about $40,000 now.)
What about the social pension fund (like U.S. Social Security)? We both paid into it for a very short time. Does that need to be declared, too, even though we didn’t live there long enough to ever collect?
Hi Lonette,
Thank you for your comment. The Treasury Department is going to require that you file the FBAR for your investment account even if you have no control over how it is invested. Because the account is in your name(s), you must both report it. This is the same situation for your pension accounts.
You have not missed the grace period! The IRS recently introduced the Offshore Voluntary Disclosure Program, which is very similar to the OVDI program. The reduced rates are not quite as low, but you are still able to come forward and face lower rates and avoid criminal charges.
If you need assistance with your tax preparation, please feel free to contact us!
Sincerely,
The Greenback Team
hello,
SHould I disclose any income to IRS even if it has not exceeded 10 k limit.
I have a joint bank account with my father in another county. If he has paid tax in his county should i disclose that to IRS.
thanks
Hi Sam,
Thank you for your comment. You are going to need to disclosure this joint bank account to the Treasury Department if its balance has exceeded $10,000 at any given time in a given tax year. It does not matter if your father is a non-resident, or if taxes have been paid to another country – this income must be reported, as must be the account.
You are required to file taxes with the IRS if your income is higher than the threshold in a given year. The thresholds change with inflation, but have been around $9,000. This program offers individuals such as yourself a good way to come forward with late taxes and unreported bank accounts.
If you need assistance preparing your tax returns or have more tax questions, feel free to contact us at info@greenbacktaxservices.com.
Sincerely,
The Greenback Team
I saw you mentioned that only GREEN CARD holders and US citizens needs to come under OVDI.
When you say GREEN CARD – Does this mean when in process or when finally approved for GREEN CARD. GREEN CARD is a 4-5 year process. In my case it started in 2007 and got it finally in 2011? Given this which years qualifies as resident status?
Does this mean that I need to report FBAR only from 2011 year?
Please help.
Hi Ananad,
You are definitely going to need to file the FBAR for the 2011 tax year. If you were also a resident of the United States legally while trying to obtain a Green Card, you may be required to file the FBAR for those years as well. If you pass the Substantial Presence Test, FBARs may need to be submitted.
I would suggest you talk one of our expat CPA’s to fully understand your FBAR filing requirement. If you have any questions, feel free to contact us at info@greenbacktaxservices.com.
Sincerely,
The Greenback Team
I am a US citizen married to a non-resident alien (he does not have a green card or any ties to the US). This year we filed MFS so he does not have to report his income. My questions regards the FBAR: we have a simple joint bank account (saving and checking) that at one time during the year exceeded the 10K. Do I need to report it? If I do need to do so, how do I treat my non-resident husband? Do I have to mention his name as well on the form or is there any way to avoid this? It seems unfair to have to ask him to disclose his details since he does not have anything to do with the US anymore. We have filed jointly in previous years but decided to MFS from now on to simplify things.
Thanks,
Sara
Hi Sara,
Unfortunately, your joint bank account is going to be reported 100%. The Treasury will want to know the highest balance (not your portion of the account, but the highest balance) and all information about the account. The only want for your husband to really separate himself from your US citizenship would be to have separate accounts.
Please let us know if you have any other questions.
Sincerely,
The Greenback Team
Hi
I have never filed FBAR as I never heard of it. Do I need to go back and amend all tax returns and file FBAR?
Hi Sonal,
Thank you for your comment. The FBAR is not filed with your tax return and is actually not even filed with the IRS. You are going to need to file FBAR reports for the years that you have missed. You should file all of these together and explain why they were not filed. The only reason to file amended tax returns with the IRS is going to be if you failed to report income that would have resulted in a tax burden.
If you have more questions about your taxes, please feel free to contact us.
Sincerely,
The Greenback Team