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IRS Reminds Those with Foreign Assets of U.S. Tax Obligations



Nonresident aliens who received income from United States sources in 2013 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 16 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.

Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2013 must file electronically with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). This form replaces TD F 90-22.1, the FBAR form used in the past. It is due to the Treasury Department by June 30, 2014, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).

Taxpayers abroad can now use IRS Free File to prepare and electronically file their returns for free. This means both U.S. citizens and resident aliens living abroad with adjusted gross incomes (AGI) of $58,000 or less can use brand-name software to prepare their returns and then e-file them for free. A second option, Free File Filable Forms the electronic version of IRS paper forms, has no income limit and is best suited to people who are comfortable preparing their own tax return. Check out the e-file link on IRS.gov for details on the various electronic filing options.

A limited number of companies provide software that can accommodate foreign addresses. To determine which will work best, view the complete Free File Software list and the services provided. Both e-file and Free File are available until Oct. 15, 2014, for anyone filing a 2013 return.

Any U.S. taxpayer here or abroad with tax questions can use the online IRS Tax Map and the International Tax Topic Index to get answers. These online tools assemble or group IRS forms, publications and web pages by subject and provide users with a single entry point to find tax information.

SOURCE: IRS Newswire, Issue Number: IR-2014-52

In accordance with Circular 230 Disclosure

Betty Williams has a broad range of experience handling civil and criminal tax controversy matters including income tax, employment tax, sales and use tax, property tax and IRS, FTB, and SBE audits, protests, and appeals. She has represented clients before the U.S. Tax Court and the U.S. District Courts in California. Betty has obtained penalty abatement for numerous clients ranging from a few thousand to more than $2 million in late filing and late payment penalties. She has assisted numerous clients in the United States and abroad in the 2009, 2011 and 2012 IRS and FTB voluntary disclosure initiatives. She also represents foreign financial institutions regarding Foreign Account Tax Compliance Act (FATCA) compliance. She has experience defending criminal tax matters and negotiating plea agreements in areas such as structuring, tax evasion, and the failure to file a tax return.

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