IRS Reminds of April 15 FATCA and FBAR Filing
IRS reminds those with foreign assets of annual April 15 FBAR deadline
Source: Issue Number: IR-2019-63 Inside This Issue
WASHINGTON — The Internal Revenue Service today reminded U.S. citizens and resident aliens, including those with dual citizenship, that if they have a foreign bank or financial account, April 15, 2019, is the deadline to file their annual Report of Foreign Bank and Financial Accounts (FBAR). They should also check to see if they have a U.S. tax liability and a federal tax return filing requirement.
Here is a rundown of key points to keep in mind:
Deadline
for reporting foreign accounts
The deadline for filing the FBAR is the same as for a federal income tax
return. This means that the 2018 FBAR, Form 114, must be filed electronically
with the Financial Crimes Enforcement Network (FinCEN) by April 15, 2019.
FinCEN grants filers missing the April 15 deadline an automatic extension until
Oct. 15, 2019, to file the FBAR. Taxpayers don’t file the FBAR with individual,
business, trust or estate tax returns. Taxpayers who want to paper-file their
FBAR must call the Financial Crimes Enforcement Network’s Regulatory Helpline
to request an exemption from e-filing.
In general, the filing requirement applies to anyone who had an interest in, or signature or other authority, over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2018. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.
IRS
ends Offshore Voluntary Disclosure Program (OVDP)
The IRS will continue to use tools besides voluntary disclosure to combat
offshore tax avoidance, including taxpayer education, whistleblower leads,
civil examination and criminal prosecution. The IRS continues to use
streamlined filing compliance procedures that will remain in place and be
available to eligible taxpayers. But, as with OVDP, the IRS said it may end the
streamlined filing compliance procedures at some point.
Most
people abroad need to file
An income tax filing requirement generally applies even if a taxpayer qualifies
for tax benefits, such as the Foreign Earned Income exclusion or the Foreign
Tax credit, which substantially reduce or eliminate U.S. tax liability. These
tax benefits are only available if an eligible taxpayer files a U.S. income tax
return.
A special extended filing and payment deadline applies to U.S. citizens and resident aliens who live and work abroad. For U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, the income tax filing and payment deadline is June 17, 2019. Taxpayers have two extra days because the normal extended deadline—June 15—falls on a Saturday this year. The same applies for those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return.
Interest, currently at the rate of 6 percent per year, compounded daily, will apply to any payment received after the regular April 15 deadline.
Nonresident aliens who received income from U.S. sources in 2018 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens is April 15.
Special income tax return reporting for foreign
accounts and assets
In addition to the annual Report of Foreign Bank and Financial Accounts (FBAR)
requirements outlined above, federal law requires U.S. citizens and resident
aliens to report any worldwide income, including income from foreign trusts and
foreign bank and securities accounts. In most cases, affected taxpayers need to
complete and attach Schedule B to their tax return. Part III of Schedule B asks
about the existence of foreign accounts, such as bank and securities accounts,
and usually requires U.S. citizens to report these items for the country in
which each account is located.
Also, separate from the foreign accounts reporting requirements above, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
Specified
domestic entity reporting
Certain
domestic corporations, partnerships and trusts that are considered formed for
the purpose of holding (directly or indirectly) specified foreign financial
assets must file Form 8938 if the total value of those assets exceeds $50,000
on the last day of the tax year or $75,000 at any time during the tax year.
Report
in U.S. dollars
Any income received, or deductible expenses paid in foreign currency must be
reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must
be made in U.S. dollars.
Both FinCen Form 114 and IRS Form 8938 require the use of a December 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
Expatriate
reporting
Taxpayers
who relinquished their U.S. citizenship or ceased to be lawful permanent
residents of the United States during 2018 must file a dual-status alien tax
return, attaching Form 8854, Initial and Annual
Expatriation Statement. A copy of the Form 8854 must also be filed with
Internal Revenue Service, Philadelphia, PA 19255-0049, by the due date of the tax
return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for
Expatriates Under Section 877A, for further details.
Choose
Free File or e-file
U.S.
citizens and resident aliens living abroad can use IRS Free File to prepare and
electronically file their tax returns for free. This means both U.S. citizens
and resident aliens living abroad with adjusted gross incomes (AGI) of $66,000
or less can use brand-name software to prepare their returns and then e-file
them for free. A limited number of companies provide software that can
accommodate foreign addresses.
A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return. Both the e-file and Free File electronic filing options are available until Oct. 15, 2019, for anyone filing a 2018 tax return. Check out the e-file link on IRS.gov for details on the various electronic filing options. Free File is not available to nonresident aliens required to file a Form 1040NR.
End of IRS Reminder
Zaher Fallahi, Top Tax Attorney, CPA, licensed in Washington D. C. and California, advises taxpayers nationwide, including Americans Living Abroad, with Tax Returns, Offshore Voluntary Disclosure Program, Streamlined Procedures, FBAR and Late FBAR, Foreign Gifts and Late Foreign Gifts, and International Information Filing. For an Attorney-Client Privileged Consultation, Call:
(877) 687-7558 Nationwide Toll Free
(310) 719-1040 (Los Angeles)
(714) 546-4272 (Orange County)
E-mail taxattorney@zfcpa.com
