Having bank accounts located outside of the United States may trigger additional filing requirements.
Foreign Bank Accounts
When living and working abroad it is often most convenient to open up bank accounts in your new country of residence. If you are considered to be a U.S. person for tax filing purposes by the IRS, there is a good chance that these foreign bank accounts need to be reported on an annual basis.
Foreign Bank Account Reporting
If the aggregate highest balance (in U.S. dollars) for all of the taxpayer’s bank accounts located outside the U.S., is over $10,000 during the tax year, the taxpayer is required to report all of their foreign bank accounts using form Fincen 114 on an annual basis.
Depending on the residency of the taxpayer during the tax year, and the highest or year end balances of their foreign bank accounts (in USD), their may be further reporting required in addition to the Fincen 114. The statement of Statement of Specified Foreign Financial Assets (Form 8939) is used to make these additional disclosures.
Foreign Investment Income
It should also be noted that any income earned in these foreign bank accounts (whether it be interest, dividends, or capital gains), will need to be reported on an annual basis on the taxpayers U.S. tax return. The rates at which this income is taxed may vary depending on whether or not the U.S. has a tax treaty with the country your foreign investment income is derived from.
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Any tax advice herein is based on the facts provided to us and on our interpretation of tax legislation as it reads at the time the advice is provided. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. We are not responsible for updating our advice for changes in law or interpretation after the date the advice is provided. Every tax situation is different. We are not responsible for the tax implications to any individual or entity that may act on this advice.