There is one basic obligation for US citizens and residents: file their income tax return by April 15. If you have a financial interest in a country other than the US or you have an authorized signature on those financial interests, then two more reporting obligations come to the picture: FBAR and FATCA. The latter is attached and filed with your tax return up to April 15 and the former is filed online separately up to June 30 with no extension.
Services offered for Expats, US Citizens and Residents with offshore and/or foreign financial holdings.
If you are an Expat or US Citizen or Resident with offshore and/or foreign financial holdings,you are subject to two additional reporting requirements: FATCA and FBAR.
FATCA. if you hold assets over $50,000 in a bank account or any other kind of financial assets outside the US during the year, you need to report it. This reporting goes with your regular income tax return deadline April 15. IRS imposes a penalty of $10,000 if you fail reporting and $10,000 for each month thereafter up to a maximum of $60,000. Criminal charges may also apply.
FBAR. if you hold assets over $10,000 in a bank account or any other kind of financial assets outside the US during the year, you need to report it. This reporting requirement is in addition to FATCA. FBAR reporting goes separately of your income tax return and its deadline is June 30. It is an online filing only. IRS imposes a penalty of $10,000 if you unwillfully omit this reporting. If wilfully, you will be subject to a penalty of $100,000 or 50% of your holdings in foreign accounts, whatever is greater. Criminal charges may also apply.
Services offered for US citizens and residents with unreported offshore holdings.
If you find yourself in non-compliance with these regulations for previous years, there are some remedies that you can benefit from.
IRS streamlined Program. If you want to come up-to-date with your foreign holdings over $10,000 because you were unaware of the FBAR rules, this is the program for you: file 3 years back income tax returns and file 6 years back FBAR reports, pay taxes, pay interest but NO PENALTIES AND AVOID CRIMINAL PROSECUTION
Offshore Voluntary Disclosure Program (OVDP). If you have willfully hidden funds in foreign accounts, then this is the best way to come clean. File 8 years back of income tax returns, 8 years back of FBAR reports, pay taxes, pay interest and pay penalties for up to 27.5% AND AVOID CRIMINAL PROSECUTION.
IRS Quiet Disclosures. If you do not want to pay the penalties involved for previous years of noncompliance with FBAR, you can opt for disclosing your offshore financial holdings in the year you file your income tax report without fixing your filings for previous years. But this is very risky and the IRS discouraged it. Keep in mind that you are not protected from criminal prosecution and involves a high-risk approach.
US Expatriation. If you are willing to relinquish your citizenship or resident alien status, this could help you to avoid US taxation in general, including FATCA and FBAR, only for FUTURE YEARS. You are still subject for the years you were not in compliance with FBAR and will need to pay your dues of taxes, interest and penalties but in some circumstances and depending on your financial position this could be a valid option.
This discussion is not intended as legal advice and cannot be relied upon for any purpose without the services of a qualified professional.