us expat tax guide – united kingdom
What is an FBAR and who needs to file?
The Foreign Bank Account Report (FBAR), formerly known as FinCEN Form 114, requires US persons to report their foreign financial accounts when their total value exceeds US$10,000 at any point during the calendar year. This applies to various accounts, including bank accounts, brokerage accounts, and mutual funds.
Who is obligated to file an FBAR?
US citizens, green card holders, resident aliens, and certain organizations must file an FBAR if the total of all their foreign financial accounts exceeds US$10,000 at any point in the year.
Where do I file my FBAR?
FBARs are not filed with the IRS but rather with the Financial Crimes Enforcement Network (FinCEN), specifically via the BSA E-Filing System online.
You’ll need to provide specific details about each foreign account you’re reporting, including the maximum value during the year.
What information do I need to provide on the FBAR form?
When completing the FBAR form, you must include:
- Your name, Social Security Number (SSN) or ITIN, and address.
- Names and addresses of the financial institutions where the accounts are held.
- Account numbers.
- Maximum values of the accounts during the calendar year.
Are there penalties for not filing an FBAR?
Yes, the penalties can be severe. Non-willful violations can incur a penalty up to US$10,000 (adjusted for inflation) per violation. Willful violations may result in a penalty of the greater of US$100,000 (adjusted for inflation) or 50% of the account balances at the time of the violation. There are also options to come into compliance without facing penalties, such as the streamlined filing compliance procedures.
Does the amount reported on an FBAR add taxes?
The FBAR is purely informational and does not impose taxes on the reported funds. However, any income earned from the reported accounts, such as interest or dividends, is taxable and must be reported on your US tax return. You may also be eligible for foreign tax credits if taxes were paid on this income in another country.
What is Form 8938, and who needs to file it?
Form 8938, also known as the Statement of Specified Foreign Financial Assets, is a document required by the IRS to report foreign financial assets. However, the need to file this form is based on financial thresholds that depend on your tax filing status.
You need to file Form 8938 if you are:
- Single, Married Filing Separately, or Head of Household:
- If at any time during the tax year, the total maximum balance of your foreign financial assets exceeds US$300,000.
- If at the end of the year, the total highest balances of your foreign financial assets exceed US$200,000.
- Married Filing Jointly:
- If at any time during the tax year, the total maximum balance of your foreign financial assets exceeds US$600,000.
- If at the end of the year, the total highest balances of your foreign financial assets exceed US$400,000.
Does property count towards the threshold for filing Form 8938?
No, property does not count towards the threshold for Form 8938. Financial assets that need to be reported include intangible assets like stocks, shares, investments, securities, and bank accounts.
Physical property, even if rented out, is not considered a financial asset for Form 8938 or FBAR purposes.
How do I file Form 8938?
Form 8938 is attached to your US tax return and submitted to the IRS.
How do gifts and inheritances work on a US tax return?
Gifts and inheritances are not considered income and therefore do not appear on your personal income tax return. However, reporting requirements depend on the source of the gift or inheritance.
- From a US Person: The giver must file the appropriate US gift tax forms. They may not have to pay gift taxes due to the Lifetime Gift Tax Exemption, which was US$13.61 million in 2024.
- From a Non-Resident Alien: The recipient (you) must file an informational form if the total value of the gift or inheritance exceeds US$100,000 in a year. This filing is informational only and does not incur income tax.
For example, if a US citizen or Green Card holder receives gifts from a British parent totaling over US$100,000 in a year, this must be reported. The type of gift (property, cash, etc.) does not affect the requirement; only the total value matters.
Who is responsible for inheritance tax forms?
The deceased person’s estate is responsible for any applicable gift taxes. As a beneficiary, you receive the inheritance net of any taxes. If you inherit assets, the estate should have already handled any necessary gift tax filings.
