Foreign finances and FATCA for US expats

Published:  11 May at 6 PM
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American expats are far moré likely to up sticks and move between various international destinations than other nationalities, but managing finances can be tricky, especially where taxation is concerned.

The result of this constant sampling of new destinations can result in a variety of bank accounts in different countries and currencies, causing headaches when it’s time for the annual tax return. The introduction of the dreaded FATCA has made it even more difficult, as an unintended mistake can result in horrendous fines. However familiar you are with the FBAR report and FATCA’s form 8938, checking the reporting requirements each year is the best way to feel safe. Firstly, you must remember the annual limit after which you must file is ‘over $10,000’ and it’s cumulative. If your total amount in your several bank accounts is more than the magic number, FBAR filing is compulsory, even although you can now do it electronically. You should also remember that, from 2017, your FBAR filing now follows the tax deadline of June 17.

For single expats or married couples with a spread of bank accounts who are filing separately, it’s more complicated still, with FATCA form 8938 required at the same time as the individual tax return. This task is mandatory should the value of overseas assets total more than $200,000 at the end of the tax year or over $300,000 at any one moment during that year. Couples filing jointly are allowed more – over $400,000 on the final tax year day and over $600,000 at any time during the year. Careful tracking of every account is necessary as well as horribly boring.

If you’re planning to open a bank account in a new location, it’s worth checking the financial stability of the country itself before taking the plunge. Investigating the financial market regulations as regards their impact on US expat tax laws and finding a convenient solution means you can sleep at night, although transferring money between international banks not only costs money, it makes tax liability reporting more tricky than it need be. Keeping accurate records is absolutely essential, especially if you’re able to qualify for the Foreign Earned Income Exclusion and have accounts in various countries.

Spreadsheets can help, but getting accuracy as regards currency exchange rates on particular dates can be time-consuming. Of course, you’re fully aware the US taxman only accepts reports in the greenback currency! Choosing one of the 70 countries worldwide with US double-tax treaties is the smart move, especially if you’re planning on signing up to an offshore pension plan.

Source: Greenback
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