Do you jointly own a foreign bank account with parents or siblings? If you receive no income from a foreign bank account, do you still need to report the account to the Internal Revenue Service?
The answers vary based on individual facts. In this blog, we will give a brief overview of when you need to file and FBAR (FinCEN Report 114, Report of Foreign Bank and Financial Accounts).
The United States is one of a handful of countries that requires its citizens and permanent residents to report worldwide income to the Internal Revenue Service. Failing to comply with disclosure requirements on its own carries civil and criminal penalties – up to 10 years in prison even.
A broad definition when it comes to the disclosure of foreign accounts
The Internal Revenue Code requires you to report any interest in a foreign account (this includes signatory authority) on a FBAR each year when the balance of the account exceeds a $10,000 threshold. This report is unique, because you file it with the Department of Treasury by the June 30 deadline each year.
A foreign bank does not usually issue the owner with a social security number on file a 1099-INT listing earned interest income like a domestic bank. Issues of ownership can thus be trickier on foreign bank accounts. Does this mean that everyone with any interest in a foreign account valued at over $10,000 needs to file a FBAR? Not necessarily, but if no one reports the account or income there could be trouble down the road.
When you have any interest (including a signatory interest) in a foreign bank account, speaking with a tax attorney about your situation will ensure compliance.
Source: Forbes, “Joint Offshore Accounts: Who Is Taxed And Why It Matters,” Robert Wood, July 20, 2015