Unlike other countries, Uncle Sam taxes citizens and residents on world-wide income.
Not all of it, of course: To prevent or lessen double taxation, a tax credit generally offsets foreign taxes paid, up to the amount of U.S. taxes. For U.S. citizens living abroad, the first $92,900 of earned income is tax-free as well in 2011.
The Report of Foreign Bank and Financial Accounts, also known as a FBAR is required to be filed each year unless you fall within the “at no time exceeding $10,000 category”–meaning all your foreign accounts in the aggregate did not exceed $10,000.
Who Must File? U.S. taxpayers including citizens, residents, and entities that have foreign financial accounts totaling more than $10,000 at any point during the year.
What’s an Account? Foreign bank and brokerage accounts are generally included, as are offshore mutual funds or pooled investments
FBAR Penalties. The penalties for failure to file are considerably worse than tax penalties. Failing to file a FBAR can carry a civil penalty of $10,000 for each non-willful violation. But if your violation is found to be willful, the penalty is the greater of $100,000 or 50% of the amount in the account for each violation–and each year you didn’t file is a separate violation.
Waiting for the Statute of Limitations. Hoping you’re not caught–or that if you are discovered you can plead innocence–could require an awfully long wait (forever actually) before you’re truly in the clear. If a tax return or FBAR is never filed, the statute of limitations never runs–you can’t run out the clock.
Comments powered by CComment