Spain has long been a popular location for expatriation, but how will living there affect your US expat taxes?  It is important to understand both how your US expat taxes are going to change with your move to Spain and how Spain will tax you on income earned while living there.

US Expat Taxes in Spain

If you are a citizen or permanent resident of the United States then you are obligated to file US taxes with the IRS each year no matter what country you live in.  In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with form TD 90.22.1.

While the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

• The foreign earned income exclusion, which allows you to exclude up to $92,900 of foreign earned income from your US taxes,
• The foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
• The foreign housing exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your US expat taxes.  Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file a return.  For more information, see US Expat Taxes Explained.

Who is a Resident of Spain?

Residency in Spain for tax purposes is identified by Spanish domestic legislation through the following requirements:

• An individual is present in Spain for more than 183 days during a calendar year. If there are sporadic absences, the individual must prove that he or she is a tax resident elsewhere.
• An individual has business or economic interests in Spain.
• An individual’s spouse and/or underage children are Spanish tax residents (unless another tax home is proven).

Spain Income Tax Rates

If you are a tax resident of Spain, your worldwide income will be subject to personal income tax at a progressive rate that peaks at 43%.  Non-residents are taxed at 24%.

For residents paying tax on worldwide income, the tax rates from the Agencia Tributaria for 2011 are as follows:

There are not regional or state income taxes in Spain, though Spain does impose property taxes at varying levels.

Up to 6,000 Euros, capital gains are taxed at 19%.  Gains of 6,000 Euros and above are taxed at a rate of 21%.

There are deductions that Spanish tax residents are eligible for. These include the following:

• Tax credits for investments in principal residence
• Business activities
• Foreign tax credits
• Business savings accounts
• Maternity leave

Spain does offer a special tax regime for expats on temporary assignment in Spain.  You are required to meet specific requirements, but it does give expats the opportunity to opt out of the progressive tax rate (flat rate of 24%) as well as avoid paying taxes on foreign sourced income.

US – Spain Tax Treaty

The US and Spain have a tax treaty in place, which is helpful when determining which country should be paid what taxes and at what point those taxes should be paid.  The US – Spain tax treaty is an expat’s guide to ensuring that taxes are paid to the right country.  If you are unsure of the wording of the treaty or have any questions, be sure to talk to a tax advisor to ensure the correct taxes are paid to the correct country.

Spain Tax Due Date

Like the United States, the tax year in Spain is from January 1^st to December 31^st.  Returns must be filed with the Agencia Tributaria between May 1^st and June 30^th on the year following the tax year.  You are not able to apply for extensions on the deadline for tax return filing. Payments can be made when the return is filed, or you can pay 60% with the return and complete payment of the other 40% by the end of November.

Social Security in Spain

Spain requires foreign workers to pay into social security unless they have obtained a certificate of coverage through their home country which states you are still making contributions.  If you are a resident of Spain, your mandatory contributions are tax deductible.  If you are a non-resident, any contributions made are not deductible.

Do note that there is a US – Spain Totalization Agreement  regarding social security. It explains which country should be paid social security based on residence status, duration of time spent in Spain or the US, and  whether or not you were hired by a US or Spanish company at home or abroad.

Is Foreign Income Taxed Within Spain?

If you are not a tax resident in Spain, you are only taxed on income from Spanish sources.  However, if you are a Spanish tax resident, you are required to report your worldwide income.  Note that you can exclude up to 60,100 EUR if the requirements are met.

Other Taxes in Spain

In addition to income tax on salaries paid, there are other forms of taxation in Spain.

To start, there is an 18% value added tax (VAT) that is applied to consumer goods, while the VAT on essential goods (food, water, medicine) is reduced to 8%.  Some items are reduced to 4%.

There is no wealth tax in Spain.  Inheritance tax is dealt with on a regional level and will depend on where the taxable event took place.

There are property taxes in place in Spain, and they will be identified based on the region and municipality in which a taxpayer is living.  Motor vehicle taxes are assigned based on the city in which the vehicle is registered.

Saving on US Expat Taxes

While the Spanish tax structure is not drastically different from what you are used to as an citizen of the United States, it is important to be aware of your US expat tax requirements as well as how you will be taxed by Spanish tax authorities.  If you have any questions about your US expat taxes, please contact our expat tax experts.

How much do you know about US expat taxes? This short video quickly walks through the most important terms that Americans living overseas need to know. Clear definitions and simple explanations will help increase your knowledge and understanding of US expat taxes – without overwhelming you with tax or financial jargon!

If you have any questions about your status as an expat or your US expat taxes, please don’t hesitate to contact Greenback Expat Tax Services.

In the event that an individual decides to move to France, it is important for them to understand the implications such a move has for their US expat taxes. France’s beautiful countryside and romantic atmosphere have made it a popular destination for tourists, expatriates, and retirees alike. Americans who live in France are going to be subject to the French taxation system, as well as having obligations to file US expat taxes.

US Expat Taxes in France

If you are a citizen or permanent resident of the United States then you are obligated to file US taxes with the IRS each year no matter what country you live in.  And in addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with form TD 90.22.1.

While the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

• The foreign earned income exclusion, which allows you to exclude up to $92,900 of foreign earned income from your US taxes,
• The foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
• The foreign housing exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your tax bill.  Please do note that even if you do not believe that you owe any US income taxes, you will more than likely, still be required to file a return.  For more information, see US Expat Taxes Explained.

Who is a Resident of France?

France has three qualifications for an expat to be considered a resident of France.  Meeting any requirement will qualify you as a resident for tax purposes.  The criteria are as follows:

• Your family’s primary home (where your family gathers on a habitual basis) is located in a French territory, or in the event that you do not have a family home, your primary residence is in a French territory.  This is defined by spending more than 183 days in France or spending more time in France than any other foreign country.
• Your primary employment or professional activity is derived from France.  If you have professional activities in many countries, you are considered a resident if most of your activities take place in France.
• France is the place of your center of economic activity.

France taxes “family units,” and a married couple will be required to file a joint tax return.

France Income Tax Rates

In France, all income is subject to French taxation unless specifically identified by the French Tax Authorities.  Tax rates are progressive and are capped at 41%.

The tax rates from the French Tax Authorities for 2011 are as follows:

Non-residents of France are not eligible for a standard exclusion, and are taxed at a minimum rate of 20%. However, there is a special tax regime for foreign nationals on temporary assignment in France.

To be eligible, the individual must not have been a resident of France in the five years preceding their arrival and must not be assigned to live in France for more than six years. This special regime can only be applied to French taxes for five years.  Additional compensation or benefits are exempt from French taxation, including housing allowances or relocation costs.  These items must be specifically mentioned in the employment contract before beginning employment. Under this same regime, individuals who are recruited by a French employer can also elect a 30% tax exemption in place of the itemized exemptions mentioned above.

US – France Tax Treaty

The US and France have a tax treaty in place which is helpful when determining both which country should be paid specific taxes and at what point those taxes should be paid.  The US – France tax treaty is an expat’s guide to ensuring the taxes are paid to the right country.  The treaty is relatively straightforward, but for any questions it is recommended to seek expat tax advice.

France Tax Due Date

Like the US fiscal year, the French tax year is the calendar year.  When taxes are paid, however, depends on your residence status, where you are located, and how you file.

If you are a resident and filing a paper return, your returns are due May 30^th of the year following the tax year.  If you are a resident and e-filing, your returns will be due on the 9^th, 16^th,or 23^rd of June, depending on your address.

For non-residents, French taxes are going to be due June 30^th.

Social Security in France

The US-France Totalization Agreement explains to which country social security is paid under each residency and employment circumstance.

If a US employer sent you to work for less than five years, you pay into US Social Security.  If your assignment is more than five years, you pay into French social security.  If you were hired in France by either a French or US employer, you pay into France’s social security.  If you are on a US government assignment, you pay into US Social Security regardless of residency.

Is Foreign Income Taxed Within France?

Worldwide income will be taxed in France if you are considered a French resident. While the US-France tax treaty does exclude certain types of income, any excluded income is still taken into consideration when determining what tax rate will be applied to your personal income in France.  For individuals who are non-residents, they will only be required to pay French taxes on income that is sourced from France.

Other Taxes in France

In addition to income tax on salaries paid, there are other forms of taxation in France.

There is a standard TVA (France’s value added tax) rate of 19.6% on consumer goods with a reduced rate on certain items such as food items, which are taxed at 5.5%.

If you are a resident of France, worldwide capital gains are taxed as part of your income.  All capital gains are taxed at progressive rates, though there are exemptions for items such as furniture, motor vehicles, or asset transfer due to death or gift. Capital gains from the sale of shares are taxed at 30.3%.  Capital gains from the sale or real estate are taxed at 28.3%, though principal residences are tax exempt. For non-residents, only capital gains sourced from France are taxable at the same progressive rates.

There is no inheritance, estate, or wealth tax in France.

Saving on US Expat Taxes

If you plan on living in France, it is important to understand your French filing requirements while remembering your US expat tax requirements as well.   If you have any questions about your US expat taxes, please contact our expat tax experts.

As a US expatriate living abroad and filing your expatriate tax return, you must make sure that you take full advantage of Form 1116 and Forms 2555 . These forms are used to apply the Foreign Tax Credit Form and the Foreign Earned Income Exclusion Form. The Foreign Earned Income Exclusion basically excludes a big chunk of your foreign earned income from your US expat taxes. You may know that even as a US expat, all of the income that you make outside of the country is subject to identical tax rates to someone who is working and living inside of the US. That is where Form 2555 comes in. With this exclusion, you can exclude up to $92,900 USD of income that you have earned abroad from your US expatriate tax return. While including potential deductions of housing and living expenses, it is possible to counterbalance most if not all of your tax liability in a given calendar year.

This short video explains a few fundamentals about the Foreign Earned Income Exclusion and how it can help reduce the amount of taxes you owe while living overseas.

Click Here to Read the Transcript

Don’t worry! Greenback can help you:

• Learn more by reading Expatriate Tax Return Savings Tips on our website.
• File amended tax returns and forms accurately and in a timely manner.
• Help you find the best ways to reduce or eliminate the taxes you owe by completing your US expat taxes for the current year.

Please visit our website at www.greenbacktaxservices.com for more information!

India has been identified by multiple sources as one of the most important economies for future investments, but how does that affect your US expat taxes?  India’s position as an international IT headquarters in addition to its undeniably unique culture and beautiful geography make India an appealing location for expatriates seeking opportunity.  It is important to understand how US expat taxes change with your move to India and how India will tax you on income you earn while living there.

US Expat Taxes in India

If you are a citizen or permanent resident of the United States then you are obligated to file US taxes with the IRS each year no matter what country you live in.  And in addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with form TD 90.22.1.

While the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

• The foreign earned income exclusion, which allows you to exclude up to $92,900 of foreign earned income from your US taxes,
• The foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
• The foreign housing exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your US expat taxes.  Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file a return.  For more information, see US Expat Taxes Explained.

Who is a Resident of India?

Residence status is determined each fiscal year. For each fiscal year in which an individual is considered a resident, they are required to pay taxes in India.  There are three types of residency statuses:

• Resident and Ordinarily Resident (ROR) – individuals who spend more than 181 days in India in a given fiscal year and have more than 729 days in India over the past seven years.
• Resident but Not Ordinarily Resident (RNOR) – individuals who spend more than 181 days in India in a given fiscal year but have spent less than 730 days in India over the previous seven years.
• Non-Resident – individuals who spend 181 days or less in India but have earned income in India.

Tax residency in India also depends on the scope of the income tax liability.

India Income Tax Rates

Income tax rates are progressive, and applied to your income based on your residency status.

• Resident and Ordinary Resident (ROR) – Worldwide income
• Resident but Not Ordinary Resident (RNOR) – Income with is derived from India or received in India
• Non-Resident – Income derived from India or received in India

The tax rates from the Indian Ministry of Finance for 2011 are as follows:

* Female residents are allowed to exclude up to 190,000 of their income from taxation.

If you are Resident and Ordinarily Resident in India (ROR), you will be taxed on worldwide capital gains.  If you are not Resident and Ordinarily Resident in India, you will only be taxed on gains derived from India.

Note that income is deemed taxable in India if it is received for services rendered in India (even if paid outside of India) or is from income or transfer of assets situated in India, irrespective of the place of receipt of the sale.

There are some allowable deductions for income, including retirement annuities, mortgage interest, education loans, and medical expenses.

US – India Tax Treaty

The US and India have a tax treaty in place which is helpful when determining which country should be paid specific taxes and at what point those taxes should be paid.  The US – India tax treaty is an expat’s guide to ensuring that taxes are paid to the right country.  If you are unsure of the language in the treaty or have any other questions, be sure to talk to a tax advisor to ensure the correct taxes are paid to the correct country.

India Tax Due Date

You should be aware that tax dates in India are different than the deadlines for US expat taxes. This means that you will need to pro-rate your income earned and taxes paid for reporting on your US expat taxes.

The tax year in India begins April 1^st and ends March 31^st of the following year.  Tax returns must be submitted with the Ministry of Finance by July 31^st.

You are required to file taxes for expats in India if your income exceeds INR 180,000 (INR 190,000 for female residents).  You will also need to file a return if you wish to exclude taxation paid to the US or other tax authorities. If you are requested by the Income Tax Department of the Ministry of Finance to submit a return, you are required to do so for the year requested.

Social Security in India

India requires expatriates working in India and Indians working abroad to pay into the mandatory statutory provident fund.  There are contributions from both employers and employees.  The contribution is a basic 12% of a taxpayer’s salary plus applicable allowances (cash equivalents).

The US does not currently have a social security agreement with India, meaning that expatriates could face double taxation on social security taxes paid on both Indian and US expat taxes.

Is Foreign Income Taxed Within India?

You will be taxed on worldwide income if you are considered Resident and Ordinarily Resident (ROR) in India.  Those with other residency statuses are only required to report income sourced in India or earned from activities occurring in India.

Other Taxes in India

In addition to income tax on salaries, there are other forms of taxation in India.

To start, there is a 12.5% value added tax (VAT) that is applied to consumer goods.  There are certain goods that have lower VAT rates (ranging from 1% to 4%).  Other goods have a higher VAT of 20%, such as alcohol and petrol.  Note that the VAT varies in each state.

You will be required to pay taxes on capital gains, including real estate or the gifts of assets, if you are considered Resident and Ordinarily Resident (ROR) in India.

Saving on US Expat Taxes

India has an economy that is growing and modernizing, and India is seen as one of best destinations for those seeking opportunity. The country’s relatively low tax rates make India an even more promising destination.  It is just as important to be aware of the tax rates, deadlines, and regulations of taxation and India as it is to keep up with your obligation to file US expat taxes.   If you have any questions about your US expat taxes, please contact our expat tax experts.

People who file their own taxes sometimes worry about making a big mistake that might result in an audit – or in short-changing themselves from a deserved tax refund. But the IRS says that it’s often the little problems that cause headaches for citizens. Below are five common errors for you to avoid this tax season:

1. Names or numbers that don’t match Social Security records. When entering SSNs for anyone listed on your tax return, be sure to double-check that each digit is correct. People also sometimes incorrectly enter dependents’ last names, often due to a misspelling or using a family surname instead of the name on the dependent’s Social Security card.
2. Filing status errors. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) with Dependent Child. Refer to Publication 501, Exemptions, Standard Deduction and Filing Information, to determine which status best fits your situation.
3. Math and computation errors. When preparing paper returns, review all math for accuracy – or file electronically, so the software does the calculations for you! Many taxpayers also make mistakes when figuring their taxable income, withholding, and estimated payments, or exemptions and deductions due to the Earned Income or Child and Dependent Care Tax Credits, Standard Deduction for Age 65 or Over, or the taxable amount of their Social Security benefits.
4. Incorrect bank account numbers for direct deposit. When asking for your refund via direct deposit, be sure to double-check your bank routing and account numbers before you submit your return. Most people choose direct deposit because it’s a faster option, but there’s nothing fast about having to track down and correct bank errors!
5. Forgetting to sign and date the return. Just as an unsigned check is invalid, so is an unsigned tax return. You need to sign your own return, and both spouses must sign a joint return. When you e-file, you will be prompted to verify your electronic signature by using a Personal Identification Number and your Adjusted Gross Income (AGI) from last year’s electronic return. Remember, do not use an AGI amount from an amended return, Form 1040X, or a math-error correction made by IRS.

Saving on Expat Tax Services and Returns

Creating an error-free tax return is just one of many items to consider when filing your expat tax returns. And if you are looking for ways to reduce your expat tax liability or you have any questions about your US expatriate tax returns, please do not hesitate to contact us at http://www.greenbacktaxservices.com/contact/.

You are going to be required to file US expat taxes no matter which country you live in, but how will they be affected if you’ve chosen to live in beautiful Brazil? It is important to understand how your US expat taxes are going to change with your move to Brazil, and to understand how you will be taxed by Brazil while residing there.

US Expat Taxes in Brazil

If you are a citizen or permanent resident of the United States and you live overseas, then you are obligated to file US taxes with the IRS each year.  In addition to the regular income tax return, you could also be required to file an informational return on your assets held in foreign bank accounts with form TD 90.22.1 (known as the FBAR).

While the US taxes the international income of its citizens and permanent residents who reside overseas, it does have special provisions to help protect them from double taxation including:

• The foreign earned income exclusion, which allows you to exclude up to $92,900 of foreign earned income from your US taxes,
• The foreign tax credit, which allows you to offset the taxes you paid in your host country with your US expat taxes dollar for dollar, and
• The foreign housing exclusion, which allows you to exclude certain household expenses that occur as a result of living abroad.

With proper planning and quality tax preparation, you should be able to take advantage of these and other strategies to minimize or even eliminate your US expat taxes.  Please note that even if you do not believe you will owe any US income taxes, you will more than likely still be required to file a return.  For more information, see US Expat Taxes Explained.

Who is a Brazilian Resident?

In Brazil, you are considered a resident from the moment you arrive if you are the holder of a permanent visa or temporary work permit.  If you come to Brazil for other reasons and are in the country for more than 183 days (consecutive or not) in a 12 month period, you will also be considered a resident for tax purposes as of the first day that exceeds the 183-day period.

The Brazil Income Tax Rates

If you are a Brazilian resident, your worldwide income will be subject to personal income tax at a progressive rate that peaks at 27.5%. If you are a non-resident, you are responsible for taxes only on Brazilian income, and you are not required to even bother filing an income tax return until you become a resident.

For residents paying tax on worldwide income, the tax rates from the Secretariat of the Federal Revenue of Brazil for 2011 are as follows:

There are no regional or state income taxes in Brazil, though some municipalities will levy a service tax on businesses or real estate transfers (usually 2%).

For residents, capital gains are taxed at 15%.  Taxpayers are not able to apply their losses against their other income, but have been able to net gains and losses from sales of securities on a Brazilian public stock exchange.

There are some capital gains that are exempt from tax, including unique real estate (that does not exceed R$440,000), sale of assets with prices of less than R$35,000/month, amounts from the sale of securities on the public stock exchange for less than R$20,000, or proceeds from real estate if they are re-invested in another real estate property within 180 days.

US – Brazil Tax Treaty

The US and Brazil do not currently have a tax treaty in place. This can negatively impact your US expat taxes while you are living in Brazil.

Brazil Tax Due Date

For corporate taxes, the fiscal year is the tax year.  For individual income taxes, the taxable period is any given calendar month. You will also be required to file an annual tax declaration, with the tax rates being calculated to an annual average to make up for any fluctuations in monthly income.  These returns must be filed by the last working day of April in the year following the tax year.  Although payments are withheld on a monthly basis, taxpayers must pay annual taxes on income not subject to withholding, such as investments.

Social Security in Brazil

While Brazil has multiple Totalization Agreements, there is not one with the USA.

Brazilian social insurance taxes are paid by both employers and the employees.  The rate ranges from 8% to 11% of a monthly salary.  As of July 2010, the maximum contribution was R$381.  Note that these contributions are deductible from monthly and annual income tax. Because there is no Totalization Agreement between Brazil and the US, you will also be required to pay into US Social Security. This is done before you get the foreign earned income exclusion, so you will have a cash expense on your US expat taxes.

Is Foreign Income Taxed Within Brazil?

If you are considered a resident of Brazil, your foreign income will need to be reported, and taxes will be levied on that amount.  If you are not a resident, you are not required to pay taxes to Brazil on foreign income.

Other Taxes in Brazil

In addition to income tax on salaries paid, there are other forms of income that are taxed in Brazil.

• Non-cash compensation is considered taxable, including housing allowances, any services that were provided, or company cars.
• Brazil does not impose any sort of inheritance or wealth tax.  However, certain states can choose to impose a gift, death transfer, or donation tax.  An example of such a state is Sao Paulo, which imposes a gift or inheritance tax of 4%.
• Brazil has a tax similar to the value added tax (VAT) established in most countries, which in Brazil is called the ICMS.  A general rate of 18% applies (for in-state circulation), as well as specific rates for certain goods (such as a 25% rate on luxury goods).

Saving on US Expat Taxes

With the many various forms of taxation that are applied to foreign nationals working and residing in Brazil, it is important that you apply all of the exclusions, deductions, and credits to your US expat taxes.  Brazil is neither a tax haven nor a high-tax destination, but understanding your filing obligations will help minimize your taxes – both in the US and Brazil.  If you have any questions about your US expat taxes, please contact our expat tax experts.

If you’re an expat with foreign accounts or an expat who’s been delinquent or noncompliant in the past, you need to be aware of how the FBAR affects you and the options you have for either avoiding penalties or getting current. This guide will explain everything you need to know about the FBAR, including who needs to file, how to file, and when to file as well as information about related topics like the Foreign Account Tax Compliance Act (FATCA) and the Offshore Voluntary Disclosure Initiative (OVDI).

Who Needs to File the FBAR?

Basically, anyone with $10,000 or more (USD equivalents included) in a foreign bank or financial account at any point during the calendar year will be required to file Form 90-22.1. This means that if you have a checking account in France with a steady balance of $9,950 but the account contains an extra $50 for a day, you will still be required to report that account on the FBAR, as well as any other foreign accounts you have.

It is also important to note that FBAR filing requirements apply to the aggregate balance—meaning that the $10,000 does not have to be in one account but can be spread out over multiple accounts. If you have five foreign bank accounts each with $2,000, you will have to report the accounts on your FBAR.
The IRS says that the FBAR is required for “United States persons” who meet the reporting threshold. The term “US persons” refers to citizens, resident aliens, trusts, estates, and domestic entities. FBAR filing requirements apply to joint accounts as well, because they apply to persons with financial interest in or signature authority over the foreign account(s). “Financial interest” is determined based upon who is the owner of record or legal title. “Signature authority” means that you have some level of control over the disposition of assets through direct communication with the institution.

What Needs to be Filed? Reporting Information on Form TD F 90-22.1

Recordkeeping is the most essential aspect of keeping up with your yearly FBAR obligations. Submitted FBARs must contain the following information:

• The maximum value (converted to USD using the end of year exchange rate) of each account during the reporting period,
• The name on the account(s),
• The number/other designation of the account,
• The type of account, and
• The name and address of the institution or other person with whom the account is maintained

Many expats also find that they have to file one year and not the next. For this reason, it is important to make good recordkeeping a habit. Your FBAR will be filed on Form TD F 90-22.1 and submitted to the Treasury, not the IRS.

When to File: Deadlines and Submission Details

The FBAR must be filed by June 30th every year and no extensions are available. While the IRS accepts returns by the date postmarked, the Treasury only accepts FBARs by the date received. The new BSA E-Filing System has made filing much less of a hassle. If you plan to mail in a hard copy, send to:

When using an express mail service, send to:

Why You Should File the FBAR: Penalties and the Foreign Account Tax Compliance Act (FATCA)

Penalties

Penalties for FBAR noncompliance can be severe—violators can be charged civilly, criminally, or both. Negligent or non-willful violations have civil penalties of up to $500 and $10,000 respectively, and no criminal penalties will be assessed. The civil penalty for willful noncompliance is up to $100,000, and criminal penalties of up to $250,000 or 5 years in prison or both can and will be assessed in addition. If you are found to be breaking certain other laws, the penalties could escalate to up to $500,000 or 10 years in jail or both.

There are exceptions, however. In the event that you are late filing your FBAR, but none of the income was unaccounted for on your taxes, no penalties will be assessed against you. In addition, reduced penalties are available for delinquent filers under certain circumstances. For example, special consideration is given to first-time filers and individuals with no previous history of delinquency or tax evasion. When filing your FBAR late, include a statement explaining exactly why you are filing late. The Treasury will evaluate your statement and determine whether or not there was reasonable cause for your delinquency. If they find that you had reasonable cause, no penalties will be assessed.

The Foreign Account Tax Compliance Act (FATCA)

Many people have been comfortable evading the FBAR (and, likely, a portion of their income taxes) in the past because it has been hard for the IRS to track down violators. The FBAR is required for US citizens because foreign banks don’t have the same reporting requirements as institutions in the US, but this fact also makes it harder for the US to investigate potential noncompliance cases. The Foreign Account Tax Compliance Act (FATCA) is changing all of that, however. FATCA requires individuals or businesses with foreign accounts meeting the reporting threshold of $50,000 to file Form 8938 with the IRS. Form 8938 is different from the FBAR on multiple levels—it’s filed with the IRS as part of your tax return, the reporting threshold is higher, —but the most important difference is that FATCA also requires foreign financial institutions (FFIs) to report directly to the IRS regarding information about financial accounts held by US taxpayers. This means yes, there is a way for the government to find out about your unclaimed or unreported foreign assets.

Is There an Amnesty Program? Information about the Offshore Voluntary Disclosure Program (OVDP)

The IRS is currently running its third Offshore Voluntary Disclosure Initiative. The Offshore Voluntary Disclosure Program (OVDP) is more or less an amnesty program that allows noncompliant taxpayers to come forward. In exchange for filing all amended tax returns, all Form 90-22.1’s and paying all back-taxes, individuals taking advantage of the Offshore Voluntary Disclosure Program will receive reduced penalties for their former noncompliance and avoid criminal prosecution.

The 2012 OVDP framework is about the same, but the penalties have increased since 2011. In addition to filing all original and amended returns and paying all back-taxes and interest for up to 8 years, participants will have to pay a penalty of 27.5 percent of the highest aggregate balance in the foreign bank accounts during the eight years preceding the disclosure. This is up from 25 percent in 2011. Some individuals will be eligible for 5 or 12.5 percent penalties, depending on the circumstances. According to the IRS, participants in “limited situations” can qualify as well as those whose offshore accounts did not exceed $75,000. Thus far, US citizens living abroad have been given additional leniency and have been able to avoid all penalties- if they voluntarily come forward.

If you have questions about your FBAR or the Offshore Voluntary Disclosure Program, contact us about our new FBAR filing service.

After you send your tax returns to the IRS, be sure that you’re not simply shredding all of the documents you gathered to determine what you paid and what you owed. Although it’s not likely that you’ll be audited, it’s a good idea to retain documents that the IRS might request if they ever need to substantiate your return and the deductions you claimed.

What the IRS Says

Here are five tips from the IRS about keeping good records:

1. Normally, tax records should be kept for three years.
2. Some documents — such as records relating to a home purchase or sale, stock transactions, IRA and business or rental property — should be kept longer.
3. In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return.
4. Records you should keep include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
5. For more information on what kinds of records to keep, see IRS Publication 552.

So instead of tossing your documents or mixing them in with other household papers, be sure to set aside any useful records or items just in case you need them in the future.

As a citizen of the United Sates who lives abroad, you are still held accountable to the IRS via your US expat taxes. What many expats might not know is that they also have certain filing requirements with the US Department of the Treasury. One of the most common obligations expats have is to report the assets in their foreign bank accounts. This is the FBAR, or Foreign Bank Account Report, and you are required to file it (on Form TD F90-22-1) if the collective balance of your foreign accounts is or exceeds $10,000 at any point during the calendar year. Form TD F90-22-1 is relatively easy to complete and is nothing more than a report of your foreign assets.

New FBAR filing requirements

The US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a new FBAR filing system in July 2011. This system—known as the BSA E-Filing System—is electronic and allows for online submission of the FBAR. In September, FinCEN announced that e-filing of the FBAR would be mandatory beginning June 30, 2011. June 30 is the annual FBAR due date.

If your foreign bank accounts exceed the current $10,000 threshold, this new requirement means that you will have to file your FBAR either via the paper form or electronically. The penalties for failing to file your FBAR electronically will be the same as the penalties you would face for failing to file the FBAR in its traditional form. Current penalties depend both on the reason for your delinquency and the value of your foreign account(s) but can still be quite severe regardless. Individuals who fail to file on time or at all could be subject to up to a $50,000 fine per offence, seizure of 50 percent of the highest foreign balance, or both. That said, the IRS, who enforces FBAR compliance, has been very lenient with US Expats when it comes to FBAR reporting.

FinCEN Postpones Mandatory e-Filing of the FBAR

According to the FinCEN, the new mandatory FBAR e-filing will be postponed until July 1, 2013. It is important to note, however, that your paper-filing requirements still stand. You will still be expected to file your FBAR in its traditional form (Form TD F90-22-1) by the regular due date of June 30th. There are no extensions for the FBAR.

As mentioned, the penalties for failing to file your FBAR can be harsh. Your paper FBAR must be submitted to the US Department of the Treasury (not the IRS) by June 30 each year.

Ask the Experts

If you have questions about your own FBAR filing needs or if you would like assistance in completing your FBAR form, contact the experts at Greenback Expat Tax Services at www.greenbacktaxservices.com.