For several decades, our world has operated in a global economy. In 2020, many Americans have bank accounts overseas. For those who have an overseas with more a balance of at least $10,000 at any time during the year, Americans must include those accounts in their yearly taxes – whether those accounts accumulated interest or not.
Failing to report overseas accounts
If you fail to report a foreign bank account on your taxes, you can face stiff penalties from the IRS. The most significant of those is a $100,000 tax penalty. In 2018, among the many charges former Trump campaign manager Paul Manafort and political consultant Rick Gates faced were charges of failing to report foreign bank accounts on their taxes.
Taxpayers need to be aware that the IRS defines a foreign country as any area outside the United States, including U.S. territories, such as:
- The District of Columbia
- American Samoa
- Puerto Rico
- The U.S. Virgin Islands
Also, those who have foreign financial accounts held in individual retirement accounts don’t need to report those accounts.
Correcting filing mistakes
If you fail to report an overseas bank account on your tax returns, you can file an amended return if the tax deadline hasn’t passed yet. If you receive a notice from the IRS about reporting incorrect information, you’ll have the chance to correct it. Or you may receive notice that the IRS is examining your return or auditing it.
If the IRS is examining or auditing a return, you may want to seek the help of an experienced tax attorney. An attorney familiar with tax laws can help ensure you don’t make any further mistakes during the audit process and help negotiate any tax penalties you may face.