Tax Tips for U.S. Americans Abroad
Did you know that the FBAR deadline still remains the same, even despite new tax filing and payment deadlines are happening due to the coronavirus? While the date is important, it’s equally important to determine if you need to file an FBAR, and how that process works in the first place.
FBAR Filing Deadline
The Foreign Bank Account Report (FBAR) form falls in line with the typical US tax deadline: April 15. This is for both US Americans living in the US and abroad.
The FBAR is actually not owned by the IRS, but FinCEN, which stands for Financial Crimes Enforcement Network. It is part of the US Treasury.
For Americans abroad, to successfully file the FBAR, you’ll need to fill out Form 114. Form 114 is called the Report of Foreign Bank and Financial Accounts. It’s a comprehensive and extensive form, which is why we suggest you save money and time and file with us at MyExpatTaxes instead. Especially since some of the information from your FBAR needs to be transferred onto your federal tax return.
FBAR Filing Deadline Extension
Just like the automatic tax-filing extension deadline for Americans abroad, there is an FBAR one too. Americans abroad have an automatic extension to file the FBAR until October 15.
Yes, even though the dates of the tax filing and paying have been pushed to July 15th for all Americans this tax year, regardless of where they live, the FBAR extension deadline remains the same.
US citizens abroad don’t need to file to get an extension to October – it is already given to you if you did not file by the April 15 deadline.
The Foreign Bank Account Report is an important form for Americans abroad. However, not everyone needs to file it every year. What is essential is that you have a financial account (share one, or have signature authority over one) overseas. Also, having another financial account, such as an overseas investment account is important to make note of too.
All of this is imperative to know and be responsible for because if you were supposed to file the FBAR and didn’t, hefty penalties can come your way. The FBAR helps Americans abroad prevent being taxed on personal foreign bank accounts. Which is why this seemingly small form is something not to ignore if you are required to file.
How do you know if you are required to file an FBAR? First, start keeping track of all your bank accounts balances periodically. If you notice that at any one time in the year the combined max of one or all of your foreign accounts exceed $10,000, you’ll need to file an FBAR.
Since Americans abroad are no longer living in the US and are instead using different currencies, you’ll need to convert your foreign bank money into US dollars when checking if you exceeded the $10,000 threshold.
We at MyExpatTaxes know it can be a hassle to convert currency and check your bank accounts, but it is necessary. As an American expat, you are bound by US law to report worldwide income to the IRS. Just look in your US passport to see this law.
Keep in mind that there are some foreign accounts that don’t need to file the FBAR, even if they exceed $10,000, such as an account owned by the government or an account maintained by the US military.
FBAR-approved Financial Accounts
As stated in our ”Do I Need to File an FBAR?” blog post, here are some of the most common types of foreign financial accounts that will require an FBAR to be filled out once you pass the $10,000 threshold:
- Any and all bank accounts established outside the US: Including American banks in foreign countries (ie: Bank America/Bank Austria).
- Foreign life insurance policies with cash value: Americans abroad must pay premiums on foreign life insurance policies to get a nice annuity for retirement. This is also a foreign financial account. However, term life insurance policies that have no expected cash flow or investments don’t count.
- Foreign mutual funds: If you are using a foreign broker instead of a US broker
- Pension funds from working abroad: If you are working for a company, most companies will be able to set up a pension fund for you. If you’re working abroad, you probably already have a foreign pension with money that you can take out at some point.
FBAR Solutions with MyExpatTaxes
If you do miss or neglect filing an FBAR over many years, you may need to pay a fine. FBAR penalties can get up to $10,000 for more serious cases. It’s unnecessary, which is why we at MyExpatTaxes want to help you become and stay compliant. This is so you don’t have to pay unnecessary penalties!
While FBAr violations and forgetting to file can be costly, there is an opportunity to get back on track. The Streamlined Procedure is a tax amnesty program for Americans abroad. We at MyExpatTaxes beat competitors by making Streamlining simple and very affordable. Do sign up via our app if you want to try it out!
Otherwise, the FBAR form is already ready for you to be filled out when you walk through our expat tax software. There is still time to file your US taxes. Make sure you do it with a friendly, reliable and affordable company!
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