If you are earning foreign income or foreign assets, then odds are you’re going to have to disclose them to the IRS. The IRS has been requiring more and more foreign transaction and foreign asset disclosures over the years, and unfortunately, the tax forms concerning foreign reporting can be complicated and confusing. This is especially true since you may need to disclose your foreign assets to FinCEN (the Financial Crimes Enforcement Network) as well.
Foreign Financial Asset Disclosure Forms
If you have foreign financial assets, then odds are you’re going to have to fill out two different forms, the FinCEN Form 114 (the Report of Foreign Bank and Financial Accounts disclosure form) and the IRS Form 8928 (the Statement of Specified Foreign Financial Assets). The following are some of the things you should know about each form:
- FinCEN Form 114 – FinCEN is a bureau of the U.S. Treasury. Its job is to collect and monitor information concerning financial crimes, such as money laundering. Form 114 is filed with FinCEN and not with the IRS. If the total value of your foreign accounts exceeds $10,000 in the calendar year, then you must fill out a Form 114. These accounts include bank accounts, brokerage accounts, securities, retirement accounts, pension accounts, mutual funds and more. The form must be filed electronically by October 15th, and a failure to do so could result in a penalty of at least $10,000.
- IRS Form 8928 – Form 8928 should be filed with your federal tax return. It’s required if you meet the asset value filing threshold, which depends on your marital status and place of residence. These thresholds include:
- If you’re single living in the U.S., you must file form 8928 if your foreign income amounts to $50,00 at the end of the year or $75,000 during the year. If married, it’s $100,000 at the end or $150,000 during.
- If you’re single living outside of the U.S., it’s $200,000 at the end of the year or $300,000 during. If married, it’s $400,000 at the end or $600,000 during.
These are the forms that you will likely need to fill out in order to disclose any foreign financial assets or income you might have. Because reporting foreign income or assets can be a bit tricky, it’s a good idea to get professional assistance. Contact us at Valezar & Associates for all of your tax planning and accounting needs today.