U.S. TAX GUIDE IN THE UK
What is an FBAR and who needs to file it?
The Foreign Bank Account Report (FBAR), known as FinCEN Form 114, is required for US persons with foreign financial accounts that exceed $10,000 at any time during the calendar year. This includes bank, brokerage, and mutual fund accounts.
Who is required to file an FBAR?
US citizens, green card holders, resident aliens, and certain organizations must file an FBAR if the combined total of their foreign accounts exceeds $10,000 during the year.
Where to file an FBAR?
File your FBAR with the Financial Crimes Enforcement Network (FinCEN) via the BSA E-Filing System online.
What information is needed for the FBAR form?
To complete the FBAR form, you need:
- Your name, SSN or ITIN, and address
- Financial institutions’ names and addresses
- Account numbers
- Maximum account values during the year
Are there penalties for not filing an FBAR?
Yes, penalties for non-compliance can be severe. Non-willful violations may incur a penalty up to $10,000 per violation.
Willful violations can lead to a penalty of the greater of $100,000 or 50% of the account balance at the time of the violation. You can use streamlined filing compliance procedures to mitigate penalties.
Does reporting on an FBAR add taxes?
No, the FBAR is informational and does not add taxes to the reported funds. However, any income earned from these accounts must be reported on your US tax return, and you may be eligible for foreign tax credits.
What is Form 8938, and who needs to file it?
Form 8938, the Statement of Specified Foreign Financial Assets, reports foreign financial assets to the IRS based on specific thresholds related to your tax filing status.
When do you need to file Form 8938?
- Single, Married Filing Separately, or Head of Household: File if your foreign assets exceed $300,000 at any time during the year or $200,000 at year-end.
- Married Filing Jointly: File if your foreign assets exceed $600,000 at any time during the year or $400,000 at year-end.
Does property count towards the Form 8938 threshold?
No, property does not count. Only intangible assets like stocks, shares, investments, and bank accounts need to be reported.
How do you file Form 8938?
Attach Form 8938 to your US tax return and submit it to the IRS.
How do gifts and inheritances work on a US tax return?
Gifts and inheritances are not considered income and do not appear on your personal income tax return. Reporting depends on the source:
- From a US Person: The giver files US gift tax forms.
- From a Non-Resident Alien: If the total value exceeds $100,000 in a year, the recipient must file an informational form.
Who is responsible for inheritance tax forms?
The deceased person’s estate handles applicable gift taxes, and the beneficiary receives the inheritance net of any taxes. If you inherit assets, the estate should have managed any necessary gift tax filings.
