U.S. citizens and residents as well as specified domestic entities (e.g., domestic trusts), are taxed on their worldwide income. When foreign accounts exceed a set amount, such taxpayers are required to report annually on their holdings. This is in addition to including the income earned on these foreign accounts on their tax returns. These reporting requirements are not new, but individuals continue to slip up and pay severely for their mistakes, intentional or unintentional.

Annual Reporting

There are two types of annual reports: one required by the Bank Secrecy Act filed with the U.S. Treasury (referred to as the FBAR report because the name of the form used for reporting is Report of Foreign Bank and Financial Accounts) and another Form 8938 Statement of Specified Foreign Financial Assets is required by the Foreign Account Tax Compliance Act (FATCA) to be filed with the IRS. Individuals may be required to file one or both of these forms annually.

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