If there’s four things the US government loves more than anything else, it’s paperwork, procedure, acronyms and taxes. The FBAR involves all four, and not knowing what it is can cost you big time money.
FBAR stands for Foreign Bank Account Report. But c’mon; it really is a bit more fun to just say FBAR.
In a nutshell, FBAR is a tax filing document for US citizens with one or more international back accounts that has reached an average balance of over $10,000 during the year. The accounts can be held directly or indirectly in the form of:
- Bank account;
- Brokerage accounts;
- Direct ownership of foreign mutual fund;
- Foreign-issued cash-value life insurance; or
- A trust.
Immigrants Caught in the Web
The FBAR was launched in the 1970s to catch large doses of tax abuse by US citizens sheltering money in overseas bank accounts. Billions of dollars have flowed to the IRS because of the FBAR, and they became a bit more aggressive with its enforcement after the 9/11 attacks ignited attention to terrorist funding.
However, immigrants whose only desire is to become US citizens, have become ensnared by this procedural trap.
While the US government doesn’t place much emphasis on telling people about the FBAR, they are quick to impose some fairly serious punishment for not knowing about it. Failure to complete the FBAR can result in:
- Up to $250,000 in fines and
- Five years in prison.
Talk about being blindsided! Nobody should be hit that hard for not completing a form they were not even told about in the first place.
It’s Different Here
The US is a bit different than most other countries when it comes to taxing procedures. Once a person becomes a US citizen, all the money they earn throughout the world is taxed by the IRS. Most other countries do not tax their citizens for money earned beyond their borders, so it’s understandable that new US citizens have not even thought about such a thing.
What is downright wrong, though, is for new citizens to be heavily penalized – in many cases of up to 50 percent of their assets that were earned overseas legitimately before becoming US citizens.
America is not doing herself any favors by being seemingly unable to communicate with her new citizens. Many US-owned companies serve as HIB visa sponsors, and in 2014, the top sponsors were based in technology, accounting and health fields.
Salaries for these so-called “smart” visa holders averaged $105,000. Their population jumped from 499,218 in 2010 to 820,431 in 2012. Does the US really want to reverse the trend on that influx of taxable income by encouraging these new citizens to return to the native land?
Do the Smart Thing and Don’t Be Blindsided
The US tax code is difficult to navigate, and it’s obvious that reform is needed to address issues like the FBAR. With over 1,900 IRS forms and publications, mistakes – and the worries that come with them – are easy to make.
Until remedies are made, it’s smart to enlist the expertise of professionals like EfileFBAR. Their knowledge means you can save thousands of your own money, not to mention the many worries that come with guesswork of doing it yourself.
Send an email to firstname.lastname@example.org to get the conversation started.