The IRS estimates that there are more than1 million taxpayers who should be reporting their foreign assets, but are not. The IRS has two types of foreign asset reporting requirements: Foreign Bank Account Reporting (FBAR) and the Foreign Account Tax Compliance Act (FATCA). Each has its own reporting requirements.
Generally, the FBAR requires reporting whenever a taxpayer has an interest in, or signatory authority over, a foreign financial account(s), but only if the aggregate value exceeds of $10,000 at any time during the year. FATCA requires reporting when taxpayers filing jointly have foreign assets exceeding $100,000 on the last day of the year, or $150,000 at any time during the year. The FATCA reporting thresholds for single taxpayers are $50,000 and $75,000.
The penalties for failure to comply include substantial monetary fines and possible jail time.
Currently the IRS has an amnesty in effect for taxpayers who have not properly reported in previous years. (The first reporting year for FATCA is 2011.) While there is still a financial penalty under the amnesty, it is less than the fine levied if you are caught. Taking advantage of the amnesty will allow the taxpayer to avoid jail time.
If you have questions about reporting foreign assets please contact the Gray, Gray & Gray tax department at (781) 407-0300.