End-of-Year Considerations for U.S. Taxpayers with Offshore Accounts

U.S. taxpayers who own offshore accounts have annual filing obligations that do not apply to other taxpayers. As failing to meet these filing obligations can potentially trigger civil or criminal penalties, it is imperative that offshore account holders prioritize compliance. With the end of 2024 fast approaching, what do offshore account holders need to know? Learn about some important end-of-year considerations for U.S. taxpayers with offshore accounts from Texas FBAR attorney Lawrence Brown.

The End-of-Year Filing Thresholds for Offshore Account Disclosures

One of the first things to keep in mind is that taxpayers’ obligations to disclose offshore accounts are subject to various account value thresholds. While the value of many taxpayers’ offshore accounts will easily exceed all of these thresholds, if your offshore accounts do not exceed any of them, then you are not required to file.

Two federal statutes establish offshore account disclosure obligations for U.S. taxpayers. The first is the Bank Secrecy Act (BSA), which establishes the requirement to file a Report of Foreign Bank Accounts (FBAR). The second is the Foreign Account Tax Compliance Act (FATCA), under which qualifying taxpayers must file IRS Form 8938.

Under both the BSA and FATCA, the obligation to disclose offshore accounts is dependent on the value of these accounts during the relevant tax year. If the aggregate value of a taxpayer’s offshore accounts is below the following thresholds at the end of the year, then the taxpayer is not required to make the relevant filing:

• BSA End-of-Year Filing Threshold: $10,000
• FATCA End-of-Year Filing Thresholds: $50,000 for unmarried individuals living in the United States ($100,000 for those married filing jointly), and $200,000 for unmarried individuals living abroad ($400,000 for those married filing jointly)

All of these are aggregate values, meaning that if any one or more of a taxpayer’s offshore accounts exceeds one of these thresholds, then the taxpayer must report all offshore accounts in accordance with the relevant law. While Form 8938 gets filed with the Internal Revenue Service (IRS), taxpayers must file their FBARs with the Financial Crimes Enforcement Network (FinCEN).

The “Any Time” Filing Thresholds for Offshore Account Disclosures

Even if the aggregate value of a taxpayer’s offshore accounts does not exceed any of these end-of-year filing thresholds, the taxpayer may still be required to file an FBAR or IRS Form 8938 (or both) if the aggregate value of the taxpayer’s offshore accounts exceeded the “any time” threshold under the BSA or FATCA. These thresholds trigger filing requirements if exceeded at any point during the tax year:

• BSA “Any Time” Filing Threshold: $10,000
• FATCA “Any Time” Filing Thresholds: $75,000 for unmarried individuals living in the United States ($150,000 for those married filing jointly), and $300,000 for unmarried individuals living abroad ($600,000 for those married filing jointly)

If your offshore accounts have exceeded an applicable “any time” threshold in 2024, it is too late to avoid triggering filing obligations in 2025. However, if you are considering moving funds offshore and you are not currently required to file an FBAR or IRS Form 8938, you could consider waiting until after December 31 to avoid filing an FBAR or IRS Form 8938 (or both) next year.

Do You Need to File an FBAR, IRS Form 8938 or Both?

As you can see, the filing thresholds under the BSA and FATCA are vastly different. Why is this the case? While there are several reasons, one of the main reasons is that FATCA does not apply solely to offshore accounts. Under FATCA, the filing thresholds take into account the aggregate value of a taxpayer’s “foreign financial assets.” Along with offshore accounts, foreign financial assets also include (but are not limited to):

• Foreign stocks and securities
• Foreign financial instruments
• Contracts with non-U.S. persons
• Interests in foreign entities
• Other non-account assets held for investment

As a result, some U.S. taxpayers will need to file an FBAR only, some will need to file IRS Form 8938 only and some will need to file both. If you are unsure of your filing obligations, you should consult with an experienced Texas FBAR attorney who can help you comply with the BSA and/or FATCA as necessary.

Understanding the Risks of FBAR and FATCA Non-Compliance

How important is it to meet your FBAR and FATCA (IRS Form 8938) filing obligations? As noted above, depending on the circumstances involved, offshore disclosure violations can trigger civil or criminal penalties. These penalties include:

Civil Penalties

Civil penalties under the BSA and FATCA start at $10,000 per failure but can be far greater. Under the BSA, for example, the maximum civil penalty for failing to properly disclose offshore accounts is the greater of $100,000 or 50 percent of the balance of the accounts at issue.

Criminal Penalties

Criminal penalties under the BSA include up to a $250,000 fine and five years of federal imprisonment. For FATCA violations, taxpayers can face prosecution for failing to file a return or filing a false return, both of which also carry substantial fines and terms of imprisonment.

When Do You Need to File Your Offshore Account Disclosures for 2024?

FBARs and IRS Form 8938 are both generally due on Tax Day, which is April 15, 2025 for the 2024 tax year—though FBARs are eligible for an automatic six-month suspension. However, if you are behind on your offshore disclosure filings, you will want to address your delinquency as soon as possible in order to mitigate your penalties. Depending on the circumstances at hand, this may involve submitting a late filing, submitting a streamlined filing or participating in the IRS’s Voluntary Disclosure Practice (VDP).

Request an Appointment with Texas FBAR Attorney Lawrence Brown

If you have questions or concerns about offshore disclosure compliance, you will want to speak with an attorney as soon as possible. At Brown Tax, P.C., we represent high-income and high-net-worth taxpayers in significant federal tax controversies. To request an appointment with Texas FBAR attorney Lawrence Brown, please call 888-870-0025 or tell us how we can contact you online today.