Foreign Reporting Requirement Tips

The Foreign Account Tax Compliance Act requires all U.S. citizens and resident aliens to report the existence of and income from foreign accounts.  This includes foreign trusts, banks and securities accounts.  You may need to file one or more of the following forms in order to comply with the Act:

 

You may have to file Form 8938, Statement of Special Foreign Financial Assets, with your tax return. This form is used to report specified foreign financial assets if the aggregate value of those assets exceeds certain thresholds. The thresholds are one or more specified foreign financial assets having an aggregate value exceeding either $50,000 on the last day of the tax year or $75,000 at any time during the tax year ($100,000 and $150,000, respectively, for married individuals filing a joint annual return).

 

Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, is used by certain U.S. citizens and residents who are officers, directors, or shareholders in certain foreign corporations. A separate Form 5471, along with the applicable schedules, must be filed for each applicable foreign corporation.  Form 5471 is filed as an attachment to your income tax return.

 

Another potential foreign reporting requirement is the Form 114, Report of Foreign Bank and Financial Accounts, commonly referred to as the FBAR. This form is filed with the Financial Crimes Enforcement Network, or FinCEN. FinCEN is a bureau of the Treasury Department. You generally must file the form if you had an interest in foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014. This also applies if you had signature or other authority over those accounts. You must file Form 114 electronically.  The deadline to file this form is June 30th.

 

If you have any foreign income or assets, you should contact your tax advisor to be certain of your reporting requirements. The penalties for failing to file all foreign reporting are onerous so make sure you don’t overlook these.