globe money passport

Foreign Financial Account Filings Exceeded 1 Million in 2015

The IRS touted the growing number of taxpayers complying with foreign financial account reporting on Tuesday—an indication of improving awareness of and cooperation with (highly controversial) offshore tax rules.

U.S. citizens have long been required to report all worldwide income, regardless of its source. Recently, additional reporting requirements were added to what was already one of the world’s most onerous international tax regimes. For instance, U.S taxpayers who hold foreign accounts with assets that exceed a certain threshold (generally $10,000) must report the assets on Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

The Treasury’s Department of Financial Crimes Enforcement Network reportedly received 1,163,229 FBARs in 2015, an 8 percent increase from the previous year. In the last five years, FBAR filings have grown at an average rate of roughly 17 percent a year.

“Taxpayers here and abroad need to take their offshore tax and filing obligations seriously,” IRS Commissioner John Koskinen said, adding, “improving offshore compliance has been a top priority of the IRS for several years, and we are seeing very positive results.”

Interestingly, filings of Form 8938, the reporting instrument associated with the controversial Foreign Account Tax Compliance Act (FATCA), remained flat at around 300,000. Attempting to read into this figure is difficult, as FATCA targets wealthy citizens (the reporting thresholds start at $50,000 but vary by taxpayer), who, presumably, can afford to employ highly sophisticated advisors, but has outsized effects on those of more modest means who live and work abroad.

Perhaps the number of filings isn’t increasing because these capable advisors have acted quickly to bring their clients into compliance. This theory is reinforced by the fact that there were 200,000 filings in 2011, the first year of the form; that number rocketed to 300,000 by 2014 and then stopped dead, implying a swift rush to comply. On the other hand, perhaps the new filers were simply offset by the ever-increasing number of expats (of varying wealth levels) who are renouncing their U.S. citizenships and freeing themselves from the reporting requirement altogether. More than 4,000 (4,279) Americans renounced their U.S. citizenships in 2015, up from 932 in 2012, certainly enough to drag down what otherwise may have been moderate growth in filings.

Regardless of your opinions on the reporting requirements, however, they are the law of the land, and the IRS is correct in its assertions that awareness and compliance are imperative. Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015 must file FBARs electronically through the BSA E-Filing System website by June 30.

For clients living abroad, information on the tax rules that apply can be found in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish