How U.S. Foreign Information Reporting applies to Your Cross Border Holdings
by Michael J. Tedesco
As another filing season is upon us, it is important to be aware of the extensive information reporting associated with holding assets outside of the U.S. Failing to file necessary information returns or filing incomplete information returns can result in substantial penalties.
FBARS – U.S. Persons, meaning individuals and entities, with a financial interest in or signature authority over one or more foreign financial account(s) must file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (“FBAR”), if the cumulative value of their accounts exceeds $10,000 at any time during the taxable year.
Deadline – For the 2015 taxable year, the FBAR is required to be electronically filed by June 30, 2016. There is no provision for an extension of time to file.
Form 8938 – In addition, foreign accounts and other foreign assets must be reported on a U.S. taxpayer’s income tax return. Form 8938, which is filed with the income tax return, has the broadest reporting requirements relating to foreign assets. However, certain foreign interests have specific forms on which they must be reported. For example, interests in foreign corporations, trusts and partnerships may have to be reported on Form 5471, Form 3520-A or Form 8865, respectively.
Form 8938 has various filing threshold values for Specified Individuals depending on their residency and filing status. While the filing of certain information returns exempt those same assets from being reported on Form 8938, there is no similar exception for foreign accounts reported on an FBAR.
Foreign businesses operating in the U.S. must also file certain information returns. U.S. companies with foreign owner(s) must report information about those owners and certain transactions between them and the company.
Consequently, U.S. persons or entities with an interest in foreign assets must ensure all necessary information and tax returns are filed. Anyone with questions regarding their U.S. tax or information return obligations should contact an attorney or accounting professional immediately to evaluate their reporting obligations.