Last week we concluded a two-part overview on the taxation of foreign accounts and income. In this follow-up post, we will get even more specific about reporting requirements.
But what is it that you may actually have to file? In this post, we want to remind you of the multiple reporting requirements that apply to offshore income and assets.
One of these requirements is the need to report all of your worldwide income on your income tax return and answer questions there on Schedule B about foreign assets. The schedule asks you to check “yes” if, during the tax reporting year, you had a “financial interest in or signature authority over” a foreign account.
As you do this, keep in mind that you may need to check this box even if the foreign account in which you have an interest does not meet the income thresholds for requiring the filing of FinCEN Form 114. This form is otherwise known as the FBAR (Report of Foreign Bank and Financial Accounts).
It is also important to be aware that regardless of whether you meet the FBAR thresholds, you may still have to file Form 8938 as part of your income tax return. Form 8938 is the Statement of Specified Foreign Financial Assets.
We will devote an upcoming post to the question of what types of foreign assets have to be included on Form 8938. This tends to be complicated question, and the IRS has included a detailed set of questions and answers on its website.
For our purposes in today’s post, what we want you to know is that, for foreign accounts, there are essentially two different sets of filing requirements. One set comes due on April 15, with your income tax filing.
But for accounts that meet certain valuation thresholds (generally $10,000), there is an additional reporting requirement. This year, the deadline for that reporting is June 30.
Source: IRS, gov, “Schedule B“