Retiring Overseas: New Jersey Tax Lawyer Kevin Thorn Discusses U.S.Tax ComplianceOffshore Account Update
Posted on October 31, 2018 | Share
Many Americans dream of retiring abroad, perhaps to a tropical island or other exotic and stress-free location.
The last thing anyone wants during their retirement years is an IRS tax reporting headache. That’s why consulting a New Jersey tax lawyer is a great way to understand the IRS requirements for banking abroad before you make an error that could cost you some of that retirement money.
The Possible Impact of the Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act – or FATCA – requires that overseas accounts be reported to the IRS. Under the FATCA’s dual reporting requirement, when a U.S. taxpayer opens an account in another country’s bank with a $10,000 or higher deposit, the overseas bank is supposed to report that the account has been opened and how much was deposited. It is the U.S. taxpayer’s responsibility to also file a report with the IRS.
How FATCA Can Affect Your Access to Foreign Banks
Not every overseas bank has the systems in place to comply with the IRS reporting requirements. So even if well-meaning U.S. ex-pats want to open accounts overseas, the foreign bank might actually refuse their business, citing the hassles of the U.S. reporting requirements as cumbersome and prohibitive.
Anyone who has spend time abroad without an in-country bank account knows that it can be frustrating to not be able to hold funds in an local bank. This becomes even more problematic for anyone making his or her permanent home abroad.
Tips for Complying With Tax Laws While Living Overseas
While there is no substitute for consulting with a qualified New Jersey tax lawyer on banking overseas, the following tips will help you understand some of your IRS compliance responsibilities when living abroad.
Carefully Review and Properly Answer All Questions on Your Tax Returns
It is easy to make a mistake on IRS tax form filings, especially if you have bank accounts in different countries.
Schedule B of the IRS tax forms requires that you disclose any bank accounts you maintain in foreign countries. It is easy to overlook this question or inadvertently answer no, especially since many online self-serve tax filing programs are pre-set to answer “no.” Whether you are living outside the U.S. or plan to move outside the U.S., improperly answering this question in the negative when you, in fact, do have an out-of-country bank account can cause problems.
It doesn’t matter how much money you are keeping in an overseas account, you need to check the right box and disclose the account or you could be penalized.
Assets of $10,000? Be Aware of Extra Reporting Rules
Be aware that, depending on the amount you maintain in an offshore bank account, you may be required to file additional paperwork with the U.S. government. If you are a U.S. taxpayer and you maintain an overseas bank account with assets of at least $10,000, you are required to file a Report of Foreign Bank and Financial Account every year. The failure to do so can result in penalties. It’s easy to miss this obligation because it is a stand-alone requirement that must be fulfilled regardless of where else you might have disclosed the existence of the account.
Talk to Counsel Before You Make An Error
It is always better to take proactive steps to comply with IRS and other government reporting requirements, rather than trying to fix a problem after the fact. A New Jersey tax lawyer can help you understand and prepare to meet all the U.S. financial reporting requirements know what to do before you move abroad. For a consultation, contact Kevin E. Thorn, Managing Partner, at email@example.com or (201) 842-7696 today.