How to Retire Oversees and Avoid Tax PenaltiesOffshore Account Update
Posted on October 31, 2018 | Share
The IRS rules can sometimes be complicated and burdensome for taxpayers to follow, so consulting with a Boston tax lawyer for advice can be important to make certain that you're following the rules. You can also read on to find some key facts you need to know about how to retire overseas without being hit with a big tax bill.
FATCA stands for the Foreign Account Tax Compliance Act. Congress enacted FATCA in 2010 and established dual reporting requirements. Under these requirements, when a U.S. affiliated accountholder opens a bank account in another country and deposits at least $10,000 into the account, the foreign financial institution has to report the account and the assets within it. The taxpayer is also expected to file a report of the account to the IRS.
This can be a big problem for people living abroad because they may want to open a bank account in their new home country – but many banks may not want to suddenly become responsible for submitting a bunch of paperwork to the IRS disclosing the account and assets within it. Banks may just refuse to do business with Americans, even those who are now living abroad.
Disclose IRS Accounts on Your Tax Returns
If you are an American living abroad, it is important to read your IRS forms carefully, because even a very small oversight could create serious problems if you don't do everything by the book.
For example, Schedule B asks you to disclose if you have bank accounts in foreign countries when you file your taxes. If you are using an online tax filing program, this typically defaults to “no.” However, if you do have an account abroad because you are living outside the United States now or you plan to live outside of the United States in the future, it could be a big problem that you fail to disclose your foreign account.
You need to check the correct box and provide the proper information to the IRS even if you have a very small amount of money in the account because otherwise you could get hit with big penalties.
Know the Rules for the Report of Foreign Bank and Financial Account
Taxpayers who have offshore accounts with at least $10,000 in assets have to file an annual Report of Foreign Bank and Financial Account. If they don't, they could face very substantial penalties. This form is separate from other reporting requirements and you need to make certain that you are disclosing your account each year.
Get Help From an Attorney
A Boston tax lawyer can provide you with help understanding your obligations when you retire overseas so you do not run afoul of IRS rules. For a consultation, contact Kevin E. Thorn, Managing Partner, at email@example.com or (617) 692-2989 today.