Expat Tax: US Tax Filing for International Bank Accounts and Businesses

Due to the great response from the last article on tax issues for American expats, I have included another article on the subject.  This one is an article on one of the most misunderstood areas of international business and asset protection - U.S. tax filing and reporting requirements.

As many expats with portable careers own their own businesses, this article reviews their basic requirements for tax filing and reporting.  The article's author and guest blogger Chris Rusch of Rusch Law recommends that you consult an international tax expert as to how these requirements may fit your particular situation.

One of the foundations of the United States tax system is that U.S. citizens and residents are taxed on their worldwide income. When handled properly, an asset protection structure is tax neutral, meaning it does not increase, decrease or defer personal income tax. In contrast, an active business, conducted outside of the United States, may have significant tax deferral and savings opportunities.

International Bank and Brokerage Accounts

One of the most critical filing requirements is the Report of Foreign Bank and Financial Accounts. Anyone who is a signor or beneficial owner of a foreign bank or brokerage account(s) with more than $10,000 must disclose these accounts to the U.S. Treasury.

The law imposes a civil penalty for not disclosing an offshore bank account or offshore credit card up to $25,000 or the greatest of 50% of the balance in the account at the time of the violation or $100,000. Criminal penalties for willful failure to file an FBAR can also apply in certain situations. Note that these penalties can be imposed for each year.

In addition to filing the Foreign Bank Account form, the offshore account must be disclosed on your personal income tax return, Form 1040, Schedule B.