According to the IRS:
United States persons are required to file an FBAR if:
- The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
An FBAR is required for "financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account." The FBAR filing requirement exists "to help the United States government identify persons who may be using foreign financial accounts to circumvent United States law. Investigators use FBARs to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad."
Moreover, and interest, gains, etc. from these accounts must be reported on the tax return. US Citizens and US residents should file tax returns every year, even if all of their income is earned in a foreign country.
According to the IRS:
Therefore, it is imperative that one keep up with all of the proper filings.
If this wasn't enough, there are now additional filings under FATCA:
You must file the new Form 8938 if:
- You are a US Citizen or Tax resident; and
- You have "[a]ny financial account maintained by a foreign financial institution," "[s]tock or securities issued by someone other than a U.S. person," "[a]ny interest in a foreign entity," and/or "[a]ny financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person." The types of assets that may be ensnared by this provison is quite broad, so it is strongly recommended to consult a tax professional; and
- "The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you: Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year."
- "For Taxpayers living abroad (You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or [y]ou are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days.) If you are a taxpayer living abroad you must file if . . . [y]ou are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or [y]ou are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year."
This form will need to be filed with the 2011 tax return (generally filed in 2012 for most people). Therefore, this is a new form, released November 2011.
So what are the penalties for failing to file this new form you might ask? It's at least $10,000, and up to $50,000 for a continued failure to file after the IRS notifies you of your failure to report. For most taxpayers this will be filed with the 2011 tax return they file during the 2012 tax filing season. Worse, "underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent." 40%!!!!
Just in case I have failed to emphasize how serious the US government is taking this reporting, remember that it can be a crime not to report and US government agencies such as the Financial Crimes Enforcement Network have issued warnings to dissuade people from failure to file.
Oh, and there is nowhere to hide: "FATCA will also require foreign financial institutions . . . to report directly to the IRS certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest."