For tax filing purposes, taxpayers can be referred to as “residents” or “nonresidents.” U.S. residents must generally file a tax return, and meet additional requirements, on a yearly basis. Since green card holders are considered resident aliens, they have special considerations when it comes to filing taxes, such as filing an FBAR (Foreign Bank Account Report), which is used to disclose foreign income. But how do you know whether you are considered a U.S. resident for tax purposes? And what FBAR requirements might apply to your situation? Our experienced Roseville tax preparers at Cook CPA Group will answer these questions as we guide you through some of the FBAR requirements for green card holders in California.
What is an FBAR and Who Must File It?
The Report of Foreign Bank and Financial Accounts, or Foreign Bank Account Report (FBAR), is a yearly report filed by U.S. residents and who have generated income in any part of the world. U.S. taxpayers who have foreign bank accounts must file this report, also called FinCEN Form 114, which is electronically submitted through the BSA E-Filling System. Individuals who meet the FBAR filing criteria – which our personal tax accountants discuss below – must file FinCEN Form 114.
According to the Internal Revenue Service (IRS), “Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during the taxable year must file the report.” Therefore, if you are a U.S. person who has foreign or multiple foreign accounts that total $10,000 or more, you must file an FBAR online.
This report must generally be filed on April 15 every year. If an individual cannot submit the report on that date, there is a potential extension of six months which ends in October. Failing to file this report can lead to severe civil and criminal penalties.
What Are the FBAR Requirements?
U.S. residents, resident aliens, and individuals with dual citizenship who have earned income outside U.S. borders may be liable for filing an FBAR. This mandate applies even if an individual qualifies for tax credits. Keep in mind that compliance with this requirement can only be addressed by filing FinCEN Form 114, which an experienced tax accountant can assist you with.
Nonresidents are generally not required to file an FBAR, but may have related disclosure requirements, such as filing Form 8938. In general, it is mandatory to file Form 8938 if your foreign income exceeds or exceeded $50,000 in aggregate. If you are not sure about filing an FBAR or Form 8938, you should consult with an experienced personal tax accountant in Roseville.
Do I Have to File an FBAR if I Am a Green Card Holder?
Individuals who receive permission to reside in U.S. territory legally are known as “green card holders.” Frequently, these individuals still have assets and bank accounts in their country of origin. Due to this fact, green card holders must file a yearly tax form – the FBAR – disclosing their offshore accounts. Otherwise, like any noncompliant taxpayer, they can face severe consequences.
What Are the Penalties for Not Filing an FBAR?
Filing an FBAR should always be a priority for taxpayers: we cannot stress this enough. If you’re required to report income, you must follow the rules and regulations set forth by the IRS. Not doing so can place you at risk of facing financial and even criminal consequences.
The IRS will evaluate if your noncompliance was either willful or non-willful. If your actions are determined to be non-willful, you could be fined up to $10,000 per account, per year of noncompliance.
If you knew that you had an obligation to file an FBAR for the year and willfully disregarded such requirement, you would be held accountable. Willful noncompliance with FBAR requirements could mean fines of up to $100,000 or 50% of your account balance. Additionally, you could face criminal prosecution, possibly leading to prison time.
As you can see, the IRS takes FBAR filing very seriously, and has no tolerance for individuals who do not follow the rules. Keep in mind the IRS is especially tough on willful noncompliant individuals. Retaining the services of an individual income tax accountant can help you ensure you are following the law correctly when filing your FBAR and/or Form 8938.
FBAR Tax Services for Green Card Holders in Roseville and Sacramento, CA
As stated before, you should never take your tax matters lightly. It is essential to take action and make sure you are correctly filing your income tax returns and the associated forms.
The experienced and knowledgeable Roseville CPAs at Cook CPA Group has handled numerous FBAR cases. We can guide you through the complicated tax process from start to finish. To learn more about how we can help you in a free consultation, call Cook CPA Group at (916) 724-1665 today, or contact us online.