Do you live abroad? Do you own an asset or bank or investment account that had an accumulated value or total exceeding $10,000 at any time in 2015 (or any year)? If so, you are required to file a Report of Foreign Bank and Financial Reports (FBAR). Thus, if an asset was valued at, or an account totaled, $10,001 for just one day, an FBAR is due and must be filed. The Treasury Department’s Financial Crimes Enforcement Network (FinCen) received a record high 1,163,229 FBARs in 2015. What is surprising is that FinCen data shows that FBAR filings have grown an average of 17 percent per year during the last five years. Over 90,000 taxpayers filed FBARs in 2015.
A Primer for US Taxpayers Residing Abroad
Here’s a primer for United States taxpayers residing abroad:
U.S. citizens must file a tax return. Any U.S. citizen who earns income of any kind is obligated to file a U.S. tax return every year, no matter where he or she resides in the world. Many Americans, living abroad and in the U.S., find it unfair that the United States is the only country that requires citizens to file tax returns whether or not they are earning income on U.S. shores. This is a leading reason why some Americans are renouncing their U.S. citizenship.
Renouncing Your US Citizenship to save Taxes? Think Again.
Unlike most countries, the U.S. taxes its citizens on all income, no matter where they live and where their income is earned. The current United States tax laws, because of requirements for reporting income, filing tax documentation, as well as the ensuing tax obligations, have made many Americans renounce their citizenship. Section 349(a)(5) of the Immigration and Nationality Act details a U.S. citizen’s right to voluntarily renounce his or her citizenship. Signing an oath of renunciation is an irrevocable act unless the individual is under the age of 18.
For Americans abroad, surviving in the world of FATCA and FBAR
In March, 2010, FATCA , or The Foreign Account Tax Compliance Act, was enacted by Congress to remedy a perceived growing problem with foreign banks facilitating and encouraging U.S. taxpayers to conceal assets in their financial institutions. Seventy-nine countries have since signed FATCA agreements with the IRS, which require the financial firms within each of the participating countries to report account data for accounts owned by U.S. taxpayers or face severe penalties.
Also, the IRS is now automatically exchanging digital financial account information with tax authorities in other countries.