Many U.S. citizens set up overseas bank accounts for personal and business reasons. While some people take advantage of foreign bank secrecy laws, others use offshore bank accounts as a way to hide their money and avoid paying taxes to the Internal Revenue Service (IRS).
Whatever your reasons are, you might wonder whether you have to claim your bank account in a foreign country on your taxes in the United States. Under U.S. federal law, Americans must report their foreign bank accounts when certain requirements are met.
As an experienced tax law attorney at Zuckerman Law, LLC, I represent people in matters involving offshore bank accounts in Fort Lauderdale, Florida, and throughout South Florida. I have successfully defended clients accused by the IRS of failing to report their foreign bank accounts, and I can help you, too. Call me today for personalized service and thorough legal counsel.
According to the IRS, U.S. persons must report their foreign bank accounts to the U.S. Treasury Department even if those financial accounts do not generate any taxable income. The report is known as a Report of Foreign Bank and Financial Accounts (FBAR).
If you have offshore bank accounts, you must file the FBAR when:
You have a financial interest in a foreign financial account, or signature or other authority over one or more financial accounts (i.e., bank accounts) outside the U.S.; and
The aggregate value of your overseas financial accounts is $10,000 or more, valued in U.S. dollars, at any time during the calendar year.
For the purposes of reporting foreign financial accounts, the IRS defines a “U.S. person” as:
A U.S. citizen;
A resident of the U.S.; or
A domestic legal entity (limited liability company, corporation, partnership, trust, or estate).
If you are required to report your foreign financial accounts to the U.S. Department of Treasury, you can file the FBAR electronically. Those who do not want to or cannot file electronically can call the Department’s hotline to request an exemption. Contrary to popular belief, U.S. persons who must report their foreign accounts cannot file the FBAR with their federal tax return.
The Report of Foreign Bank and Financial Accounts is filed separately and is due April 15. But what if April 15 falls on a weekend? That is the case in 2023. If April 15 falls on a legal holiday, Saturday, or Sunday, the report is due the next business day.
When reporting your foreign bank accounts, you must keep records for each reported account to establish the following:
The name of the financial account;
The number of the account;
The foreign bank’s name and address;
The type of the financial account; and
Maximum account value during the reported year.
You must keep these records for five years from April 15 (the FBAR’s due date).
Failure to report a bank account in a foreign country is associated with significant penalties. Penalties for failure to file the FBAR can be both civil and criminal. Depending on the nature and severity of the violation of FBAR rules, the criminal penalties include hefty fines and up to five years in prison.
However, you will most likely not face penalties if you report a foreign bank account after the due date as long as you have reasonable cause for the late FBAR filing.
As a tax lawyer with decades of experience, I offer personalized guidance to people who face penalties for their failure to properly report foreign financial accounts. The U.S. tax code can be quite complicated and overwhelming, which is why you might want to consult with someone who is familiar with all applicable laws and FBAR rules to help you stay out of trouble when you have a bank account in a foreign country.
Whether you have fallen behind on the FBAR filing, you need assistance with filing the FBAR, or you are already facing penalties for failure to report a foreign bank account, I am prepared to help.
At Zuckerman Law, LLC, I advise and represent clients in the United States and abroad in various tax matters, including those related to foreign bank accounts and FBAR. I help clients get their IRS problems under control throughout South Florida, including Fort Lauderdale, Boca Raton, Aventura, Miami, North Miami Beach, Hollywood, and Sunny Isles. Give me a call to discuss your unique situation.