Tax Obligations for U.S. Citizens with Foreign Assets

When an individual who is a U.S. citizen, a holder of dual citizenship with the U.S. and another country, or a resident alien of the U.S. works or lives abroad during part of a given tax year, the individual likely needs to include activity from that time abroad on their tax return.

Reporting of Foreign Earned Income and Assets

Federal tax laws require that any U.S. citizen or resident alien who earns income elsewhere in the world report that income on their federal income tax return. This requirement includes income earned through foreign trusts, interest and earnings related to foreign bank accounts, and earnings on foreign securities.

Depending on their situation, taxpayers with an interest in foreign bank and securities accounts must complete several forms. First, taxpayers must provide information about foreign bank and securities accounts using Schedule B. Schedule B requires that that taxpayer list all such foreign accounts.

Second, if the taxpayer’s interest in or authority over a foreign account exceeds $10,000 at any point during the tax year, the taxpayer must file Form 114 Financial Crimes Enforcement Network (FinCEN) – Report of Foreign Bank and Financial Accounts (FBAR) with the Treasury Department. The taxpayer must complete Form 114 by June 30 of the year following the tax year in which the taxpayer held the foreign interest exceeding $10,000.

Finally, if the taxpayer’s interest in foreign accounts exceeds the following thresholds, the taxpayer must include with their federal income tax return Form 8938 Statement of Foreign Financial Assets.

For taxpayers living in the United States:

  • Who are unmarried, $50,000 in foreign financial assets on the last day of the tax year or $75,000 in foreign financial assets at any point during the tax year
  • Who are married filing a joint income tax return, $100,000 in foreign financial assets on the last day of the tax year or $150,000 in foreign financial assets at any point during the tax year
  • Who are married filing a separate return, $50,000 in foreign financial assets on the last day of the tax year or $75,000 in foreign financial assets at any point during the tax year

For taxpayers living outside of the United States:

  • Who are unmarried, $200,000 in foreign financial assets on the last day of the tax year or $300,000 in foreign financial assets at any point during the tax year
  • Who are married filing a joint income tax return, $400,000 in foreign financial assets on the last day of the tax year or $600,000 in foreign financial assets at any point during the tax year
  • Who are married filing a separate return, $200,000 in foreign financial assets on the last day of the tax year or $300,000 in foreign financial assets at any point during the tax year

Reporting using U.S. Dollars

Taxpayers must report all foreign income and expenses using U.S. dollars on both Form 114 and Form 8938. The taxpayer must use the exchange rate effective on December 31 of the tax year to determine the amount of U.S. dollars. The taxpayer must use the exchange rate as of December 31 regardless of the exchange rate on the date that created the foreign income or expense.

Other Filing Requirements for U.S. Citizens and Resident Aliens

In addition, if a taxpayer wishes to receive a foreign earned income exclusion or a foreign tax credit to reduce their U.S. tax liability, the taxpayer must file a U.S. tax return in order to receive those benefits.

Where can I get additional help calculating my taxes related to foreign assets?

If you need help determining your taxes on foreign assets and filing your tax return, you need to speak with a tax attorney. Only a tax attorney will know the tax laws associated with foreign assets and can provide you the protection of attorney-client privilege.

By calling the telephone number located at the top of this web site or by completing the form below, you can speak to a tax attorney and get the help you need today. Remember that the initial consultation with a tax attorney is free of charge, so you have every reason to get in touch with an attorney today.

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by Mark Johnston

Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.