What is an IRS FBAR and what are you required to report to the IRS? There are a lot of questions about the requirements for US taxpayers with accounts, investments and assets offshore as well as the exchange of financial information between the IRS and foreign institutions and tax agencies. If you are not in full compliance with IRS FBAR reporting requirements, it is imperative that you act immediately to come into compliance.
US taxpayers are not simply taxed on income they earn in the United States. The United States is the only country who taxes the income of their taxpayers worldwide. Obviously, there have been many attempts over the years to reduce tax exposures through various strategies and schemes over the years, many involving Swiss or offshore accounts. The Foreign Bank Account Report or FBAR was developed to help the US to identify and tax the assets of US taxpayers around the world.
It may also surprise you to learn the IRS requires the electronic disclosure of financial account data related to US taxpayers from banks, investment houses and sovereign tax agencies around the world.
Now that you know the answer to the question what is an FBAR the next question is who does this affect? If you have offshore or foreign investments or bank accounts anywhere in the world, and the totaled balance of all your accounts exceeds $10,000 at any point during the tax year (even for one day), you are required to make a full and transparent disclosure of these holdings to the IRS on your Foreign Bank Account Report or FBAR. The FBAR is where you list all related foreign assets including:
- Bank Accounts
- Investment Accounts
- Depository Accounts
- Custodial Accounts
- Tax Favored Foreign Retirement, Pension and Non-Retirement Savings Accounts,
- Stocks in Foreign Entity or Issued by a Person Outside of the United States
- Collections Owned and Stored Abroad
- Cash Value Life Insurance Contracts
- Ownership Interest in a Foreign Corporation, Company or Partnership
Offshore cryptocurrency holdings present another challenge. There is a direct question on the IRS 1040 asking if you own any cryptocurrency. If the balance in your cryptocurrency account exceeds $10,000 you are treading on dangerous ice.
What is an IRS FBAR and what are you required to report to the IRS? If you have offshore accounts or assets we invite you to contact Allen Barron or call today to schedule a free and substantive consultation at 866-631-3470. Ask about the benefits of the attorney-client privilege and all that Allen Barron can do to help protect your interests and reduce your financial liabilities.