December 16, 2020
Follow the Foreign Account Tax Compliance Act to avoid penalties
Many individuals who live in Texas and other parts of the United States choose to use offshore or foreign bank accounts, and they face certain obligations under the law when it comes to reporting taxes. The Foreign Account Tax Compliance Act requires that U.S. taxpayers report their financial holdings that exist outside the country. If they do not, it is possible for serious penalties to result.
Taxpayers can report their offshore assets using Form 8938 if they reach the reporting threshold of at least $50,000. However, it is important to note that this threshold is higher for individuals who are married and filing joint tax returns and for certain parties who are not living in the United States. It is also important to remember that certain foreign assets may need to be reported on different tax forms, such as trusts and foreign gifts that are reported on Form 3520, in which case the information does not need to be included on Form 8938.
If taxpayers do not file the necessary information and forms with the IRS, they could face serious penalties. Those consequences could include a $10,000 fine for failing to file and another fine for up to $50,000 if the forms are not filed after notification from the IRS. If a taxpayer has valid reason for not disclosing the information, failure to file penalties will likely not apply.
Adhering with the tax laws applicable to foreign accounts and filing the correct forms can be daunting. In the event that Texas residents are facing difficulties with the IRS over their foreign accounts, they may need legal assistance. Experienced tax law attorneys who understand the Foreign Account Tax Compliance Act and how to file the appropriate information could help individuals handle any disputes that may arise.