The world is an ever-changing, ever-evolving crucible of financial and other serious challenges for expats and those considering moving abroad, as well as foreign nationals living and working in the United States. Oversight, tax exposure, and reporting requirements become more challenging each year. Financially speaking, the world in 2025 has become a much smaller place.
U.S. taxpayers are required to report worldwide income and assets. The implementation of FBAR reporting and IRS Form 8938 are two important developments to come out of the Foreign Account Tax Compliance Act or FATCA. What are some of the most important developments to consider for U.S. citizens and former citizens who live abroad, and those considering expatriation?
Most countries around the world have agreed to FATCA agreements with the United States. As a result, almost all Foreign Financial Institutions (FFIs), as well as digital currency exchanges and wallets as well as sovereign tax authorities around the world are providing information directly to the IRS about all offshore accounts, balances (present and historical), and transactions associated with any individual or personal tax identification numbers for U.S. citizens or corporate entities. These developments and associated reporting requirements for U.S. taxpayers are only the beginning of the serious challenges for expats and those considering moving abroad.
Leaving the country to live or work doesn’t eliminate your legal obligation to file tax returns with the IRS. It may surprise you to learn U.S. citizens who live and work abroad, as well as those who have foreign accounts or assets, are required to complete FinCEN Form 114 (more commonly referred to as an FBAR) each year if the aggregated balance of any and all foreign accounts exceeds $10,000 at any point, even for a single day.
The IRS has its own form to capture information about offshore accounts and assets. IRS Form 8938, the Statement of Specified Foreign Financial Assets, is required for U.S. expats, whether they file as “Single” or “Married Filing Separately” if their foreign financial assets are higher than $200,000 at the end of the tax year, or if these assets exceed $300,000 at any point during a tax year. These thresholds are doubled for those who file joint married returns.
The thresholds are much lower for those who live and work in the United States but possess qualifying foreign accounts or assets. If qualifying foreign financial assets are higher than $50,000 on the final day of the tax year or more than $75,000 at any point in the tax year, an IRS Form 8938 must be completed and submitted. Again, these thresholds are doubled for those who are married and filing jointly.
It may surprise you to learn that one of the most basic financial and serious challenges for expats and those considering moving abroad is the simple necessity to open a bank account outside of the United States. Be prepared for the bank or FFI to demand substantial detailed identification and other personal information. Many describe the application process for a new offshore financial account as similar to applying for a mortgage here in the States.
While job and budget cuts at the IRS have made headlines here in the U.S. and around the world, the systems and processes are already in place to easily identify U.S. taxpayers who attempt to hide income and assets from the agency. The IRS has deployed state-of-the-art computer systems, applications, and Artificial Intelligence to comb through the troves of information coming into the agency from around the world and tying it back to the returns and disclosures of individual U.S. taxpayers and entities. If you think you are going to leave the country and escape the purview and reach of the IRS, you have better be prepared to surrender your U.S. citizenship and passport.
These serious challenges for expats and those considering moving abroad also impact foreign nationals living and working in the United States. Many have offshore ancestral homes that have passed down through generations. These properties may or may not generate a modest income. However, the foreign nationals who qualify as U.S. taxpayers or U.S. residents must list these assets and every foreign bank account, investment account, other qualifying assets, or source of income or potential income on their U.S. tax returns and associated FBARs.
If they have failed to do so, the non-willful penalties are at least $10,000 per FBAR report and as much as 50% of the highest accumulated balance of these accounts and assets at each point, each year for the past 6 to 8 years or $100,000 per incidence, whichever is higher in cases of willful conduct. “Willful” violators also face criminal prosecution and prison time for tax evasion.
The serious challenges for expats and those considering moving abroad extend beyond the realities of banking, business, and tax reporting requirements. The IRS now has the capacity to separate you from the anonymity you believe protects you. Once they do, you will be exposed to harsh, often draconian financial and civil penalties. While many U.S. citizens are considering their options, including a potential move out of the United States, it is important to thoroughly understand the challenges you will face and the reporting requirements of any U.S. citizen or taxpayer, wherever they may choose to live.
The experienced international tax and business attorneys at Allen Barron wish to protect your interests and minimize the risks you face. We invite you to a conversation, and to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470. Ask about the protections of the attorney-client privilege.
