Frequently asked questions

Every situation is unique. To have your specific questions answered, please contact us.

These are general answers to the most common questions. To have your specific questions answered, please contact us.

What is an FBAR?

An FBAR is a Report of Foreign Bank and Financial Accounts. If you have a financial interest in or signature authority over a foreign financial (bank) account, the Bank Secrecy Act may require you to report the account yearly to the U.S. Department of the Treasury by filing a Financial Crimes Enforcement Network (‘FinCEN’) Form 114.

Do I need to file an FBAR?

All United States persons are required to file an FBAR if you had a financial interest in or signature authority over at least one financial account located outside the United States; and the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

United States person includes U.S. citizens, U.S. residents, entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States, and trusts or estates formed under the laws of the United States.

Can I paper-file an FBAR?

No. All FBARs are required to be filed electronically. However, if you are unable to file electronically, FinCEN has a Helpline that can be contacted for assistance. Let Sanders US Tax Services file your FBARs for you. Go to our Fee Estimate Calculator or Contact us for more information.

For more information about electronically filing your FBAR, check the Financial Crimes Enforcement Network (FinCEN) website using this link.

What if I have not filed a required FBAR?

Taxpayers who have not filed a required FBAR and are not under a civil examination or a criminal investigation by the IRS, and have not already been contacted by the IRS about a delinquent FBAR, should file any delinquent FBARs and include a statement explaining why the filing is late. The IRS will not impose a penalty if income from the foreign accounts is properly reported and taxes are paid on your U.S. tax return. Sanders US Tax Services is very experienced with filing delinquent FBARs. Contact us to see how we can help you.

I have signature authority over my employer’s bank accounts. Do I need to report these accounts?

Yes. If you are a U.S. person and you have signature authority over your employer’s accounts, you may be required to report those accounts on your FBAR. You have signature authority over an account if you have access to the account. For example, if you are authorized to make transfers or to communicate with the bank regarding the account, you have may have a reporting requirement. You are required to report your foreign financial accounts by filing an FBAR if the aggregate value of all your foreign financial accounts (i.e. the financial accounts in which you have a financial interest and the accounts over which you have signature authority only) exceeds $10,000 at any time during the calendar year reported.

Please contact us with any questions you may have about reporting your employer’s accounts over which you have signature authority.

I received a gift from a family member who lives in the United States. Do I need to pay tax in the U.S.?

Unlike most European countries, where tax is imposed on the receipt of a gift or estate, the U.S. imposes tax on the transfer of the estate and the person making a gift. However, there is no general answer to this question; please contact us for information.

I have invested in U.S. real estate. What potential planning techniques are available to achieve avoidance of U.S. gift and estate taxes?

The estate of a non-U.S. citizen, not living in the United States, who personally owned U.S. real estate is likely to be faced with a tax cost. Holding the real estate through an entity (holding company) can be a way to lawfully minimize the tax cost. However, every situation is unique; please contact us for more information.

I am an expatriated former U.S. citizen. What laws and codes apply to me with respect to U.S. gift and estate taxes?

Depending on your specific facts and circumstances, you may be considered a ‘covered expatriate’. Special tax rules apply for covered expatriates. U.S citizens and residents receiving a gift or bequest from a covered expatriate may be subject to tax. Contact us for more information.

I am not a U.S. citizen, and I do not live in the U.S. However, I have assets in the United States. Will I be subject to U.S. estate tax?

Yes, deceased nonresidents who were not U.S. citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets (i.e. for example American real estate and securities of U.S. companies), even though an estate tax treaty may apply. Executors for nonresidents must file an estate tax return with the IRS.

What is the filing deadline for a U.S. estate tax return for nonresidents?

The administrator of the estate of a non-U.S. citizen, not living in the United States must file a United States estate tax return within 9 months after the date of death unless an extension of time to file was granted (for which a separate form must be filed with the IRS). The importance of timely filing all required forms should not be underestimated.

What are Streamlined Procedures?

The Streamlined Filing Compliance Procedures are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.

Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and therefore seek assurance that they will not be subject to criminal liability and/or substantial monetary penalties should consider participating in the Offshore Voluntary Disclosure Program. Please do not hesitate to contact us if you are not sure which program is best for you.

What is the due date of my U.S. income tax return?

The due date for filing a U.S. federal individual income tax return generally is April 15. You can receive an automatic 6-month extension of time to file your return if you file an application for automatic extension by the due date of your return.

However, if you are a U.S. citizen or resident living outside of the United States on the due date of your return, you are allowed an automatic 2-month extension until June 15 to file your return and pay any tax due.

Be aware that the deadline for paying tax due for tax year 2022 to avoid interest is April 15, 2023.

How do I pay my U.S. tax liability?

There are various options for paying your U.S. taxes. However, if you do not have a U.S. bank account, we recommend you to pay either by credit card (fees apply) or to pay by check. The check must be a U.S.-Dollar check. Please contact us if you have any questions.

I would like to renounce my U.S. citizenship. Can you help me?

Yes, we can certainly help you. Our tax professionals are very experienced with helping U.S. citizens to decide whether renunciation of their citizenship is the right choice. Expatriation is irrevocable and should be well-considered.

Will the IRS let me know when they have received my documents?

The IRS will not acknowledge receipt of your paper-filed tax return. However, if you electronically file your tax return, you will receive confirmation your submission was accepted. When filing your FBAR, which must be done electronically, you will receive an acknowledgement by email.

What is FATCA about?

The Foreign Account Tax Compliance Act (FATCA) was enacted by the U.S. Congress in 2010. FATCA aims to target non-compliance by U.S. taxpayers using foreign (bank) accounts. Under FATCA, foreign financial institutions (FFIs) are required to report information about U.S. taxpayers to the Internal Revenue Service (IRS).

I received a letter from my bank, asking me about FATCA. How do I respond?

Under FATCA, foreign financial institutions (i.e. banks, etc.) are required to report information about their clients that are U.S. taxpayers to the U.S. Internal Revenue Service (IRS). Banks may ask their clients to confirm whether they are U.S. taxpayers. If you are uncertain about how to respond to your bank, please do not hesitate to contact us.

I received a Form W-8BEN. How do I complete the form?

The main purpose of Form W-8BEN is for individuals to certify that they are not a U.S. citizen (or other U.S. person, such as a resident alien individual). Therefore, Form W-8BEN should be used by foreign (i.e. non-U.S.) individuals to document their foreign status.

If you are a U.S. citizen (or other U.S. person), you should use Form W-9 to document your status.

If you have any questions about Form W-8BEN, Form W-9, or Form W-BEN-E, please don’t hesitate to contact us.

What is the deadline for filing my FBAR?

Generally, the filing due date for FinCEN Form 114 (“FBAR”) is October 15.

 

Where to file my paper tax return?

The mailing address you should use depends on where you live, the form you’re filing and whether you’re sending a return with or without a payment. For up-to-date information, check the IRS website using this link. Please note that when using a private delivery service (such as DHL, UPS, or FedEx), you may have to use a different address.

I live and work abroad and would like to save money for retirement. Can I set up an individual retirement account (IRA)?

An IRA is an account set up at a financial institution that allows an individual to save money for retirement. Unlike 401(k)’s, which are set up by employers for their employees, IRAs are accounts that you open on your own.

There are limits and other rules that affect the amount that can be contributed to an IRA. For 2015, the most that can be contributed to your IRA is $5,500 (or $6,500 if you are age 50 or older), or your taxable compensation, whichever is smaller. This means that, if you live and work abroad, you cannot make a contribution to your IRA if you have used the foreign earned income exclusion (FEIE, IRS Form 2555) to exclude all your foreign earned income (thus reducing your taxable compensation to zero). If the FEIE does not exclude all of your foreign earned income, you can make a contribution to your IRA up to the limit mentioned above.

Can I get a penalty for not or late filing of my FBAR?

Yes, failing to properly file a complete and correct FBAR can result in a penalty. You may be subject to a civil penalty of up to $10,000 per nonwillful violation that is not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50 percent of the balance in the account that is not correctly reported.

However, the IRS will not impose a penalty for the failure to file a late FBAR if you have properly reported all your foreign financial accounts on your tax return and have paid all tax on the income from those accounts, if you have not previously been contacted by the IRS. For more information, see the IRS website.

How to report an account that was opened or closed during the year?

You are required to file an FBAR if the aggregate value of your foreign accounts exceeds $10,000 at any time during the year. To determine the aggregate value of your foreign accounts, you must first determine the maximum value of each account separately, including accounts that were opened or closed during the year.

For example: the maximum value of foreign account 1 is $4,000, and the maximum value of foreign account 2 is $5,000. During the year, you close account 1, and transfer the balance to account 3, which is a new account. As a result, the maximum value of account 3 during the year is also $4,000. The aggregate value of all your foreign financial accounts (foreign account 1, 2, and 3) is $13,000 ($4,000 for account 1, $5,000 for account 2, and $4,000 for account 3). This means that you must file an FBAR to report all 3 accounts.

Using the same example, but instead of opening a new account, you simply close account 1 and transfer the balance to account 2. The aggregate value still is $13,000 ($4,000 for account 1 and $9,000 for account 2. Therefore, you must file an FBAR and report both accounts.

It might seem that you are overreporting your foreign financial assets because you’re double-counting the same assets. However, the FBAR is for information reporting purposes only. No tax is due with the form. If your foreign assets exceed a certain threshold, you may be required to file Form 8938 with you federal tax return.

To find out more about our FBAR services, click here.

The IRS never contacted me. Should I still file a tax return?

Yes. Even though you have never been contacted by the IRS, you may still be required to file a U.S. tax return. We strongly recommend that you become compliant as soon as possible. For more information, click here.

What are Qualified Housing Expenses?

Qualified Housing Expenses include rent, utilities (other than telephone charges), real and personal property insurance, nonrefundable fees paid to obtain a lease, rental of furniture and accessories, residential parking, and household repairs.

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