Whether you are living in the U.S. or abroad, if you are a U.S. citizen, permanent resident or an Expat, you are required to file a U.S. income tax return and informational disclosures to report world-wide income and your non-U.S. financial assets. U.S. citizens who have dual citizenship or who are so-called accidental U.S. citizens are also subject to world-wide reporting. If you were a nonresident alien who has become a U.S. resident, you have the same requirements.
While reporting of non-U.S. income and assets is not a new requirement, it is one area in which many taxpayers, especially Expats and new U.S. residents, are uninformed about their U.S. tax filing obligation to remain compliant under the U.S. tax laws.
What is included in income?
Regardless of where money is earned, income includes items such as wages, investment income from non-U.S. banks and securities, pensions, rental income, and income and distributions from non-U.S. businesses or trusts.
What else has to be reported?
All financial accounts held outside of the U.S. must be reported annually on the Foreign Bank Account Report (FBAR). Certain other foreign financial disclosures may also be necessary. Failure to report income, the FBAR and required foreign disclosures may result in civil and/or criminal penalties.
How will the IRS find out?
As part of the U.S. Foreign Account Tax Compliance Act (FATCA), the U.S. signed Intergovernmental Agreements with over 100 countries to exchange account and financial information on taxpayers. The IRS matches this information against the taxpayers’ income tax and foreign disclosure reporting in the U.S. There is virtually no country now to shelter money from tax and reporting.
What are the next steps?
Whether the filing is for the U.S. citizen or permanent resident living in the U.S. or the Expat living abroad, the reporting of non-U.S. income and assets is complex and each taxpayer’s situation is unique. Compliance with U.S. tax laws for non-U.S. financial assets requires well-versed knowledgeable tax professionals. The International Tax Group at Kerkering, Barberio & Co. has been assisting taxpayers with offshore compliance filings for more than a decade. If you have questions on the reporting of non-U.S. income and financial assets, please contact Phoebe Trumpler at or Danielle Logan at or call us at 941-365-4617.