Not everyone has the need or desire to open up a foreign bank account, but they are fairly common for some individuals in Minneapolis. These accounts are held offshore, in another country and under different rules, so how are they treated under the Federal Tax Code? And what are the reporting requirements?
Even the saaviest businessman or woman can find the complexity of the Federal Tax Code frustrating, so the need to discuss individual circumstances with a tax attorney is important. Attorneys will ensure that an individualized solution protects a client's financial interests, but information is never a bad thing.
So how about those foreign bank accounts? Is there a reporting requirement? There sure is, but it depends on the taxpayer's accounts. First, there is a threshold value amount that triggers the reporting requirement. Those with less than $10,000 in overseas accounts may not need to report them.
Two "little" details to note about this requirement. First, it is not a per-account threshold. The sum of all accounts must be below $10,000 to avoid reporting. Also, the threshold can be triggered at any point throughout the year -- when the value goes even a single cent over the threshold and then back down again.
It is also important to note that income earned from these accounts should always be reported to the federal Internal Revenue Service.
Taxpayers certainly find the reporting requirements helpful to know, but what often affects their lives in a big way are the consequences for a failure to follow the intricate requirements. Our next post will focus on the "what ifs" that could result in relation to a foreign bank account.
Source: Forbes, "Will IRS Find Your Small Foreign Bank Account?" Robert W. Wood, June 25, 2013