How Do US Citizen Expats Report Overseas Accounts to IRS: 5 Facts

How Do US Citizen Expats Report Overseas Accounts to IRS

How Do US Citizen Expats Report Overseas Accounts to IRS

When a U.S. Citizen resides overseas in a foreign country, they are considered a United States Expat. This is not to be confused with an expatriate – which is someone who has officially renounced their US Citizenship or relinquished their Long-Term Green Card. The United States is one of only two countries that follows a worldwide income and reporting tax model. This means that even if a US Citizen resides outside of the United States – and even if they have no U.S.-sourced income – they are still required to report their overseas income and bank and other financial accounts to the U.S. Government. Let’s review a few common ways Expats report overseas accounts to IRS and FinCEN:

Schedule B for US Citizen Expats

The Schedule B Form of a US Tax Return is used to report dividends and interest. BUT, there is also an additional section on the bottom of the form that refers to the ownership or signature authority of the filer over foreign accounts. Thus, a U.S. citizen who has ownership or signature authority over foreign accounts must file this form to disclose the information to the IRS.

FBAR (FinCEN Form 114) for US Citizen Expats

FBAR refers to Foreign Bank and Financial Account Reporting (aka FinCEN Form 114). It is required by US Persons who meet the threshold for filing – which is currently when there is an annual aggregate total that exceeds $10,000 on any day of the year. The form is filed electronically and is required even if no tax return is necessary. The form is currently on automatic extension.

Form 8938 (FATCA) for US Citizen Expats

Form 8938 was created in conjunction with FATCA (Foreign Account Tax Compliance Act). It is filed with the US Tax Return – which means if no US tax return is required, then no Form 8938 must be filed either. Oftentimes, accounts and assets included on the FBAR will also be included on Form 8938 – but they are not mutually exclusive of one another, and both forms may be required in the same year to report the same asset.

Form 8621 (PFIC) for US Citizen Expats

Form 8621 is used to report Passive Foreign Investment Companies – and includes common foreign investments such as Mutual Funds. Form 8621 can become very complicated in any year a Taxpayer has an excess distribution – but making certain elections may minimize the tax implications associated with the PFIC.

First Year vs First-Time Reporting

If this year is the first time you are required to report, then you would not be considered non-compliant, and amnesty should not be necessary. If you missed reporting in prior years though, the US government has developed several amnesty programs to assist Taxpayers who have undisclosed international reporting forms, such as the FBAR, FATCA Form 8938, Form 3520, and Form 5471. Taxpayers should consult with a Board-Certified Tax Law Specialist who specializes exclusively in offshore disclosure to get an understanding of what their requirements are and what their options are going forward.

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