If you are US citizen, Resident or Expat and you hold accounts in a foreign bank or foreign financial institution with a balance that exceeds $10,000 at any time of the year, you are obligated to file Foreign Bank and Financial Accounts Report (FBAR).
1. You must file if you are a citizen or US Person
2. You have a financial interest in or signature authority over an account
3. That account is a Foreign Financial Account(s)
4. The aggregate value of the account(s) exceeds $10,000 at any time during the calendar year
5. Reportable Account Exceptions
Was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed offshore accounts. There are two parts to FATCA – U S taxpayer reporting of foreign assets and income on Form 8938 and reporting by a Foreign Financial Institution or FFI of foreign bank and financial accounts to the IRS. It is the latter that is resulting in FFI’s sending out that dreaded letter to suspected US account holders requesting US taxpayer identification and information referred hereafter as the FATCA letter.
FATCA generally requires an FFI to identify certain US accountholders and report their accounts to the IRS. Such reporting is done either through an FFI Agreement directly to the IRS or through a set of local laws that implement FATCA. If an FFI refuses to do so or otherwise does not satisfy these requirements (and is not otherwise exempt), US source payments made to the FFI may be subject to withholding under FATCA at a rate of 30%. Note that FATCA information reporting and withholding requirements generally do not apply to FFI’s that are treated as deemed-compliant because they present a relatively low risk of being used for tax evasion or are otherwise exempt from FATCA withholding.
Foreign Tax Credit can be claimed if you have income that you earn outside of the United States and you also pay income taxes in your country of residence. You can still claim even if you don’t personally earn income abroad but your spouse does and you file jointly. However, there are more requirements you need to cover if you want to claim FTC.
FEIE is another method introduced by the IRS to avoid double taxation. It is generally meant for self-employed individuals who live and work abroad. FEIE does not exempt you from your Social Security tax liability. Tax credits can do that. With the new tax reform, it would be much more beneficial for expats to claim FTC than FEIE, since they can’t be received together. Here’s why:
FEIE:
FTC:
Even as an Expat, you still need to file a tax return and, depending on your income, pay taxes, as long as you have a U.S. citizenship. Your worldwide income is taxable even if you filed a tax return and paid taxes in the country where you reside. If your taxable income is over $20,000 a year and you are married; or $10,000 and single; or made over $400 per year as self-employed or contractor, you need to file a tax return.
There is a long list of tax filing requirements the IRS has determined for Expats:
Tax Planning For U.S. Expats Silver Package
For Non-willful Unreported Offshore Holdings
Tax Planning For U.S. Expats Gold Package
For Non-willful Unreported Offshore Holdings
Tax Planning For U.S. Expats Platinum Package
For Non-willful Unreported Offshore Holdings
Thanks to FAS & CPA Consultants and Fulton Abraham Sanchez, CPA, I was able to resolve a debt of $479,677.71 that I had with the IRS.
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I highly recommend FAS CPA & Consultants, they are responsible, efficient and very dedicated.
FAS CPA & Consultants
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