The Internal Revenue Service is reminding U.S. citizens, resident aliens, and those with dual citizenship who have lived or worked abroad during all or part of 2012 that they may have U.S. tax liability and filing requirements in 2013. With the possibility of large penalties for failure to comply, it is important to know the foreign asset filing requirements.
The filing deadline for 2012 individual income tax returns is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular April 15th due date. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.
Nonresident aliens who received income from U.S. sources in 2012 must also determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15th or June 17th depending on sources of income. A nonresident alien engaged in a trade or business in the U.S. during 2012 must file even if the income did not come from a trade or business conducted in the U.S., there is no income from U.S. sources, or the income is tax exempt. However, if the only U.S. source income is wages in an amount less than the personal exemption amount, there is no filing requirement.
U.S. citizens and resident aliens are required to report all worldwide income, including income from foreign trusts and foreign bank and securities accounts. Affected taxpayers need to fill out Part III, Foreign Accounts and Trusts, of Schedule B, Interest and Ordinary Dividends. This section asks about the existence of foreign accounts, such as bank and securities accounts, and requires U.S. citizens to report the country in which the account is located.
Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. U.S. citizens, resident aliens, and certain nonresident aliens who have an interest in specified foreign financial assets where the value of those assets is more than the applicable reporting threshold must file this form. If you are required to file this form, you must report the specified foreign financial assets in which you have an interest, even if none of the assets affects the tax liability for the year. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided. If applicable, Form 8938 is due with your individual income tax return. An extension to file the tax return is also applied to the filing of Form 8938.
Taxpayers that have a financial interest in or signature authority over foreign financial accounts must file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during 2012. This is not a tax form and is due to the Treasury Department by June 30, 2013. There is no extension of time to file this form.
Should you have any questions on the content of this article or your foreign assets or holdings, contact your Marcum Tax Professional.