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IRS reminds those with foreign assets about U.S. tax obligations

IRS reminded U.S. citizens and resident aliens, including those with dual citizenship, to check if they have a U.S. tax liability and a filing requirement. At the same time, the agency advised anyone with a foreign bank or financial account to remember the upcoming deadline that applies to reports for these accounts, often referred to as FBARs.

Key things to keep in mind:

Deadline for reporting foreign accounts

The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is the same as for a federal income tax return. This means that the 2017 FBAR, Form 114, must be filed electronically with the Financial Crimes Enforcement Network (FinCEN) by April 17, 2018. FinCEN grants filers missing the April 17 deadline an automatic extension until Oct. 15, 2018, to file the FBAR. Specific extension requests are not required.

Reminder: IRS to end Offshore Voluntary Disclosure Program

The Offshore Voluntary Disclosure Program will close on Sept. 28, 2018. Taxpayers with undisclosed foreign financial assets still have time to use OVDP before the deadline.

Most people abroad need to file

An income tax filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the Foreign Earned Income exclusion or the Foreign Tax credit, which substantially reduce or eliminate U.S. tax liability. These tax benefits are only available if an eligible taxpayer files a U.S. income tax return.

Special income tax return reporting for foreign accounts and assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets.

Specified domestic entity reporting

For tax year 2017, certain domestic corporations, partnerships and trusts that are considered formed for the purpose of holding (directly or indirectly) specified foreign financial assets must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year.

Report in U.S. dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Expatriate reporting

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2017 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service, Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Choose Free File or e-file

U.S. citizens and resident aliens living abroad can use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $66,000 or less can use brand-name software to prepare their returns and then e-file them for free. A limited number of companies provide software that can accommodate foreign addresses.

A second option, Free File Fillable Forms, the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return. Both the e-file and Free File electronic filing options are available until Oct. 15, 2018, for anyone filing a 2017 return.

Original Story at IRS website.