As a result of anti-money-laundering legislation that was supposed to dry up the cash flow to terrorists, a great deal of trouble has befallen U.S. citizens living overseas. Not only do Americans now have to file IRS tax returns, but any of them who hold an aggregate of $10,000 in overseas accounts needs to file additional forms with the American government. Every year, by April 15, American citizens with any kind of financial account (or financial interest in an account) need to send in the FBAR (Report of Foreign Bank and Financial Accounts).
Do not try to hide your assets
Even if you haven’t lived in America, if you have U.S. citizenship, you are subject to filing taxes and reporting financial assets.
Some expats might think that if they keep quiet, Uncle Sam won’t notice them. That’s where FATCA (Foreign Account Tax Compliance Act) comes in. FATCA requires foreign banks to report accounts of Americans to the U.S.A. Any foreign financial institution that doesn’t report the accounts held by U.S.citizens is hit with a penalty on income from American holdings. As a result, many foreign financial institutions now choose to avoid American clients due to the added compliance requirements.
Even those folks who want to be compliant don’t always get off scot-free. There are stiff penalties for forms that are improperly filled out, so a mistake can cost you dearly.
Innocent, law-abiding U.S.citizens living abroad are suffering from the onerous burden of implementing anti-terrorist and anti-money laundering legislation. Ironically, the terrorists and money-launderers of the world have found their own ways to bypass the rules, leaving everyone else to pay the price.
While the FBAR and other tax reporting obligations are time consuming for an expat, there are a few things American expats can do to make the reporting easier. Click here to get a copy of The Expatriate’s Guide to Handling Money and Taxes for tips on how to handle your assets when not living on American soil.
NEITHER PROFILE NOR PRG PROVIDES TAX OR LEGAL ADVICE. CONSULT AN ACCOUNTANT OR AN ATTORNEY ON SUCH MATTERS BEFORE TAKING ANY ACTION.
Douglas Goldstein, CFP®, is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published August 28, 2014. Updated March 2019