Any US taxpayer who has $10,000 or more in foreign (i.e. Non-US) financial accounts must declare these accounts and their maximum balances during the year on a form TD F 90-22.1. This form is a Treasury form, not an IRS form, and it should be filed by June 30th of each year. You cannot send this in with your tax returns. It goes to a separate address in the US. Reporting of Foreign Bank Accounts (FBAR) can now be done Electronically at BSA E-Filing System - Enroll Now

Many US residents aren’t aware of this requirement, and most US taxpayers don’t run into it until they relocate overseas and open up the usual round of bank, savings and investment accounts. Even if you don’t receive enough interest to have to file a Schedule B with your 1040, you may need to do so in order to answer the questions at the bottom of the Schedule. (They also mention another form, Form 3520, if you have any sort of foreign trust.) As long as you have to download the form, you might as well fill in your interest and dividend income asked for on the Schedule B - if only to “prove” to the IRS that you’re reporting all the interest from all your foreign accounts.

The Treasury form (as it was long known - now often referred to as the FBAR form) is simply a listing of your foreign accounts. Over time, they have started requiring more and more information, like the account number and the high balance for the year (at one time, they just had you indicate by range the maximum balance). There is a separate section of the form for listing accounts you hold in joint ownership with someone else and another section for accounts you have signature authority over (but no “financial interest”). Read the instructions for this form carefully to see how your various accounts fit into the several categories.

If you sign checks for your employer or for a charity or other volunteer association, then yes, you are expected to declare those accounts on this form unless your employer gives you a letter stating that they have submitted the necessary information to the IRS for you. (Usually the case with US owned employers or some other organizations with US ties.) If your spouse, or other person with whom you share an account doesn’t have a US ITIN, just fill in “NRA” (non-resident alien) in the space that asks for the ITIN. In the case of a foreign company or association that doesn’t have a US business presence, fill in “N/A” or note that this is “not a US entity” in the ITIN space.

There are further filing requirements for US taxpayers who have certain types of foreign financial investment assets. The new requirements are intended to find instances of abusive tax shelters and US taxpayers hiding money in offshore accounts and dodgy investment deals. Unfortunately, the new regs do affect some of us “simple expats” with perfectly legitimate foreign assets. These assets have to be summarized on a new form, 8938. Take a look here to see if you have to file it (and possibly some other forms related to the specific assets): Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets??

Do read the instructions for Form 8938 very carefully, as the thresholds for filing are considerably more “generous” for those of us living overseas than for those living in the US. The final version of the form also includes a more detailed definition of what they are looking for in terms of “specified foreign financial assets” which need to be reported. These last-minute definitions may alleviate the filing quite a bit for those of us who are part-owners in a small company which is also our employer or who simply have an ownership interest in the family mansion. They are not asking you to declare ALL foreign assets, only “specified foreign financial assets.” The instructions for form 8938 explain what they are looking for in more detail. See particularly pages 4 and 6 of the instructions. If the assets you report generate income, make sure your share of the income has been appropriately reported on your 1040 and supporting schedules.

We’ve already had multiple “discussions” of the moral and ethical aspect of all this “new” reporting. But it’s the law now, and we’re just here to help you determine what, if any, obligation you have to comply with this. Any information given out or shared on this site is merely advisory - plus, it’s not yet clear to what extent the IRS is going to be able (or willing) to investigate discrepancies. If you have specific concerns about your particular situation, you may want to consult a tax adviser, accountant or legal adviser but be wary of those looking to whip up panic over the new (and untested) rules and just generate bigger fees for themselves.

One of my New Year's resolutions was to get my tax situation in order. I've lived overseas for over 20 years and have never filed a return. Yes, I knew I was supposed to, but since my income has never come close to the limit, I didn't take the situation seriously enough. I have some assets in the US (IRA and CDs), but most of my assets are overseas. I had no idea about the FBAR forms.
I had planned to file returns for previous years (3 or 6) but the information I've found on this site and other places has me thinking that's not a good idea. (Would have amounted to "quiet disclosure", which apparently is frowned upon.)

What I've managed to piece together so far:
- I need to file FBAR forms back to 2003 and for 2011 the new form replacing FBAR
- I need to file tax returns - but how far back?
- The Voluntary Disclosure program has been extended indefinitely but will only give me amnesty from criminal proceedings, not from the potential fines.
- It's possible to "opt out" of Voluntary Disclosure - under what circumstances should one do that? How is it done?

I've read quite a bit in the threads and some of the links and have gathered that most people are not getting socked with penalties for filing late or for turning in late FBARs. The costs people are incurring tend to be legal fees or accountants' fees. Some have been hit with taxes on passive income (mutual funds).
What I'm not reading is closure. Most of those who filed seem to have not received answers from the IRS or the Treasury Department. Is the threat of losing 27% of my savings going to be hanging over my head for years to come?

I guess what I'm looking for is correction if my understanding of this process is flawed and reassurance that if I just get it done I'll probably be ok.
Any other tips would be welcome as well. I had planned to take my papers to the IRS office in the consulate in Frankfurt and ask for help. After what I've read here, I'm not sure that's a good idea either.
Should I file under Voluntary Disclosure or should I file returns with a cover letter stating what I'm doing? (Is that "noisy disclosure"?)
Am I likely to get hit with penalties for not filing FBARs?

Any help or reassurance is greatly appreciated.
Kaia

The whole FBAR thing has received a tremendous amount of publicity in some parts of the world. In other parts of the world it's virtually unknown.

The key seems to be just how much you have in "overseas" holdings and whether or not you've actually been "avoiding" applicable US taxes by not reporting them and your regular US income taxes.

If you have been reporting your income from any and all financial accounts and investment assets in Germany, then you may not owe any taxes to the US at all - only the reporting. (The taxes you pay in Germany can be used to offset any US taxes that would otherwise be due on the income from those assets.)

The official statute of limitations on US taxes is still, I believe, only 4 years, so the first thing to do is to file the current year (2011 - due June 15th 2012) and the three prior years returns. In the course of preparing those, you'll see if you have any investment income that you haven't already paid taxes on in amounts adequate to cancel out what you would have owed the US. If everything is accounted for, then I'd just file the FBARs for those years and see what the IRS comes back with (if anything).

The whole purpose of FBAR and FATCA (which requires reporting of certain financial investment assets) is to find tax evaders who have been hiding income they should have been reporting. If you've been reporting your investment and interest income and paying your taxes on it where you live, you're not really within the IRS scope of interest. You could probably even safely contact the IRS office in Frankfurt for guidance.
Cheers,
Bev

Do not go into the Voluntary Disclosure program. It is only for people who have been willfully hiding money to avoid taxes. And "Quiet Disclosure" means people who who lied on previous returns by reporting lower income than they had, and who then file an amended return showing the higher income they actually had. QD does not apply to people who have just found out they have to file or who haven't bothered filing in the past because they don't make enough money to owe anything to the IRS, and are just trying to become compliant. If you simply file your past returns, you will be fine, especially if you owe no substantial back taxes.

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Ladyhawk
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Are any of you filing explanation letters with your late FBAR's? I'm reading about these explanation letters being attached to FBAR forms.

I don't see an explanation letter being required with late 1040's when there is no tax due.

I did attach an explanation letter to my FBARs and also my 1040s. I used the identical letter for all of the FBARs but changed it to reflect that year to which it was attached. It may not have been required but I simply wanted to put it on record with the US Gov.

I filed a cover letter with each FBAR and with each 1040. I don't know how important it is for the 1040's, especially if no tax is owed, but I think it is important for the FBAR's. Probably caution should be used in the FBAR letter with no reference to "voluntary" or "disclosure". I just told the truth - I had never heard of the FBAR and had no reason to know about it because I didn't owe taxes and, for most years, didn't even have any income, so I didn't fill out Schedule "B" where it turned out it was noted. Hope this helps!

Thanks to all who responded to my cry for help. I'll get cracking and let you know how everything turns out.
Kaia

I participated in the Voluntary Disclosure Program on the advice of a U.S. tax lawyer. It's purpose is to have open disclosure of foreign accounts to the Dept of Treasury so that individuals can comply with the law. I would argue that most accounts submitted through OVDI were legitimate.

Thus Voluntary disclosure may have exposed a few "bad actors", but most are "benign actors" with legitimate accounts in the country of residence. This should be obvious to the IRS as they look through the submissions.

Finally, the IRS has extended this program indefinitely because this is how they wish people to come into compliance.

[quote=smccarth;694861]The Voluntary Disclosure program is for those who have something to disclose - i.e. an offshore account that they had been "hiding" or failing to disclose.

For those who have been living abroad for years and who are filing their first returns to clear their record, the voluntary disclosure program is not appropriate unless you have large financial investment assets of the type subject to disclosure requirements.
Cheers,
Bev