It is just three weeks until US expats need to fill in their tax forms and foreign bank account declarations but few are ready and many don’t even know they need to, according to tax experts.
The tax-filing deadline is June 15 and the Foreign Bank Account Report (FBAR) deadline is the end of next month.
The US Department of Treasury requires all US citizens and green card holders with a financial interest in or signature authority over a foreign financial account to report these accounts to the US Treasury each year.
The FBAR report must be received by the US Treasury on or before June 30th of the year immediately following the calendar year being reported. Even if you have an extension to file your US expat taxes you must file your FBAR by June 30th, as there are no extensions.
If you have a financial interest in or signature authority over financial accounts and these accounts exceeded $10,000 at any time during the calendar year you must file or face penalties of up to 50% of the account value.
The FBAR is used by the US government to identify those who may be using a foreign account to circumvent US law. Investigators use the FBAR to help identify or trace funds used for illicit purposes or to identify unreported income maintained or generated abroad. There is even some indication that the Treasury will begin to fine foreign financial institutions that help individuals hide assets overseas, which could be particularly worrying for certain large Swiss banks.
62% of Americans living overseas though do not know about FBAR. ‘This is very worrying. If these individuals do not know they need to file their FBAR they could unknowingly be putting their savings at risk and could face some very large penalties in the future,’ said David McKeegan of Greenback Expat Tax Services.
‘Although US expats are not the primary target for the FBAR, they are required to file the form if they have over $10,000 in financial accounts. Many people do not realize that there is such a thing as the FBAR, especially if they are filing their own taxes and did not have overseas assets when they were living in the US,’ he explained.
‘It is very important for US expats to file the FBAR accurately and on time. If you have not been filing your US expat taxes while living abroad or did not know about the FBAR requirement you should try to come forward now, before the end of the 2011 Offshore Voluntary Disclosure Initiative (OVDI), which ends on August 31, 2011,’ he continued.
‘This is your best opportunity to get caught up on your expatriate tax obligations and disclose your overseas bank accounts. No one knows what or how the penalties will be enforced in the future,’ he added.