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FBAR awareness and filings increase in 2015

United States law requires citizens and resident aliens (i.e. green card holders) to disclose all of their income regardless of where it was earned. This includes reporting foreign trusts and bank and security accounts held in other countries. Depending on the value of the foreign accounts various forms are required.

If you are originally from another country and still have financial accounts there, you need to pay close attention to these requirements. The Internal Revenue Service has targeted offshore tax and filing compliance as one of its highest priorities.

The Service recently reported awareness of the obligation has increased as FBAR filings surpassed one million in 2015.

FBAR requirements

The Report of Foreign Bank and Financial Accounts form shifted to FinCEN Form 114 several years ago. This disclosure is electronically filed with a Treasury Department agency.

Last year, the number of FBARs filed was a record breaking 1,163,229. Significant increases each of the last five years indicate that the IRS campaign to spread awareness is working. Prosecutions and large penalties have also garnered wide attention.

The requirement is triggered if the aggregate value of your foreign financial accounts surpassed $10,000 at any time during 2015. This value is quite low making the reporting requirement a broad one.

Form 8938 - FATCA

The Foreign Account Tax Compliance Act led to another form. Form 8938, Statement of Specific Foreign Financial Assets, thresholds are higher and start at $50,000. They vary based on filing status.

In 2015, approximately 300,000 of these forms were filed. The form was first required for tax year 2011.

As the word continues to spread about foreign account compliance, questions are common. If you inherited a foreign account or have signature authority over an aging relative's account, you may even need to report that account.

Failing to file a FBAR or Form 8938 can result in costly civil penalties and even criminal charges. A tax attorney can answer questions and discuss which disclosure option might be right for your situation.

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