Cross-Border Tax Accountants: directory of firms

The FBAR is FinCEN Form 114, filed electronically through FinCEN's BSA E-Filing System. A US person — including a citizen, resident, corporation, partnership, limited liability company, trust or estate — must file it when the aggregate value of their foreign financial accounts exceeded 10,000 US dollars at any time during the calendar year. The IRS is explicit that you do not file the FBAR with your federal tax return.

The deadline is 15 April following the year reported, with an automatic extension to 15 October if that date is missed. The threshold is an aggregate across all accounts and it is a high-water mark, so several small accounts that together crossed the line for a single day still trigger the obligation.

Form 8938 is a different report, filed with your annual return to the IRS. For an unmarried taxpayer living in the United States, it applies when the total value of specified foreign financial assets was more than 50,000 US dollars on the last day of the tax year, or more than 75,000 US dollars at any time during it; other thresholds apply to other categories. The IRS states plainly that the Form 8938 requirement does not replace or otherwise affect the obligation to file FinCEN Form 114.

Living abroad and paying tax there does not automatically remove US tax. The IRS puts the point sharply: many Americans living abroad qualify for special tax benefits, such as the foreign earned income exclusion and the foreign tax credit, but they can only get them by filing a US return.

So the common assumption — I owe nothing, therefore I need not file — inverts the actual mechanics. The relief is claimed on the return. Skip the return and you skip the claim, and the underlying liability sits there unreduced.

The rules for filing income, estate and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. What changes is the timing: taxpayers residing overseas or on military duty outside the US get an automatic two-month extension to file, which moves a calendar-year deadline from 15 April to 15 June.

The IRS operates Streamlined Filing Compliance Procedures for taxpayers whose failure to report foreign financial assets and pay tax was non-willful. It describes non-willful conduct as conduct that is due to negligence, inadvertence, or mistake, or conduct that is the result of a good faith misunderstanding of the requirements of the law.

A submission means filing amended or delinquent returns in the ordinary way, holding a valid taxpayer identification number, reporting all foreign income, filing the required information returns including FBARs, and certifying that the failures were non-willful. The certification is not a formality; it is a statement made under penalty.

There is a one-way door built in. The IRS states that once a taxpayer makes a submission under either the streamlined foreign offshore or streamlined domestic offshore procedures, they may not participate in the Offshore Voluntary Disclosure Program. Whether the facts are genuinely non-willful is therefore a decision to take with a qualified adviser, and often with a tax attorney, before anything is filed.