U.S. citizens and resident aliens are taxed not just on all of the money they keep in domestically, but also on their worldwide income. Anyone with a financial interest in (or signature of power over) a financial account which exists outside of the United States must file a TD F 90-22.1 form. For those unfamiliar with tax law, this can all get a bit confusing. But don’t worry, we are here to help. Here are the foreign asset reporting requirements that you need to know about.
What Foreign Taxpayers Need To Know
Every year U.S. taxpayers are required to report any foreign financial assets greater than $10,000.
And, in the case of assets greater $50,000, they should be reported via a 8938 form, which is a “Statement of Specified Foreign Financial Assets,” as part of the annual income tax return.
Filing A 8938 Form
There are three requirements to file Form 8938. Taxpayers must:
- Be a specified individual: A specified individual is a U.S. citizen, resident alien of the U.S., non-resident alien filing a joint income tax return, or a non-resident alien of the U.S. who is a resident of American Samoa or Puerto Rico.
- Have specifically designated foreign financial assets: These financial assets may include any account maintained by a foreign bank or financial institution, including assets held for investment. Foreign stocks or securities, as well as financial interests in foreign retirement plans, estates, trusts, pension plans, and deferred compensation plans, may be included. Residential properties, on the other hand, need not be reported.
- Have foreign financial assets valued greater than the applicable reporting threshold:
- The foreign-asset-threshold for taxpayers who are unmarried and living in the United States is either $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
- If you’re a taxpayer who is married and filing with your spouse jointly, the threshold for you is higher at $100,000 on the last day of the tax year or any amount more than $150,000 during some time the following tax year.
- The threshold for unmarried taxpayers who are living abroad is $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year. In the U.S., taxpayers with the designation “taxpayer living abroad” are defined as someone who has spent at least 330 days living somewhere outside the country over the past 12 months.
If you’re a foreign citizen it’s important to remember that the 8938 form may not the only document that you need to file. As we mentioned, if your foreign assets exceed $10,000, you need to file TD F 90-22.1 Foreign Bank Account Reporting (FBAR) separately from your tax returns and have it submitted by June 30th.
Are you in need of a foreign bank disclosure attorney? Call Ayar Law today at (248) 262-3400 for a free, no-obligation consultation.