Financial Accounts Outside the United States

U.S. taxpayers, whether a resident for tax purposes, a permanent resident or a citizen, are required by law to disclose all gross foreign income on their U.S. tax return. It doesn’t matter where you live or whether you have to file a tax return in another country.

The IRS recognises worldwide revenue in the calculation of net income and income tax liability. There are treaty incentives and tax rules that can be used with your U.S. tax return to minimise or offset your U.S. income tax or to reduce your U.S. taxable income.

Doing the right thing, at the right time.

Fincen 114, usually referred to as FBAR

You are also expected to file an annual disclosure report with FinCEN (the innocuous sounding acronym for the Financial Crimes Compliance Network) if you exceed a certain threshold of the aggregate balance of your foreign financial accounts.

The study is called FinCEN 114, usually referred to as FBAR. The disclosure must be filed electronically using the FinCEN filing system. I am not followed by a tax return. The due date is June 30 of the year following the year you are reporting. For example, the 2015 FinCEN 114 will be due on June 30, 2016. Judy Coker, EA, CAA has been assisting taxpayers with FBAR and FinCEN 114 filings for several years using the Bank Secrecy Act Filing (BSAF) efile system. Please let us know if you need our help.
In addition to FinCEN 114, you may also be asked to report such foreign assets with your tax return using Form 8938. Form 8938 rules and regulations often disclose the same accounts, but have different details or additional forms depending on the type of foreign assets you possess.

The rules of the FATCA and global cooperation with the U. S. Treasury Department is developing rapidly. The Treasury Department is entering into agreements with foreign countries to exchange information on taxpayers holding financial assets in their respective countries. The knowledge exchanged by countries varies from country to country. The Treasury Department released a list of countries

Form 8938, the FATCA Form

Foreign Currency Exchange

The way foreign currency sums are translated to US dollars is always confusing, as Form 8939 and FinCEN 114 require you to use the US Treasury exchange rate for the last day of the tax year. The rates are reported on the website of the Office of the Fiscal Service.

The IRS does not have a strictly prescribed exchange rate for income earned from a foreign source. The same applies to deductions and valuations of properties for depreciation purposes. There are, however, suggestions as to what source of exchange and the advisable timing.

Here is a quote from the IRS website: “The Internal Revenue Service does not have an official exchange rate. Generally, it supports any fixed exchange rate that is used reliably. When determining the currency of a foreign country using different exchange rates, use the rate that corresponds to your particular facts and circumstances. Use the exchange rate that prevails when you receive, pay or collect the item. If there is more than one exchange rate, use the one that most accurately represents your profits.