Are Dual-Citizens Required to Report Foreign Accounts (FBAR)

Are Dual-Citizens Required to Report Foreign Accounts (FBAR)

Are Dual-Citizens Required to Report Foreign Accounts (FBAR)

The United States requires U.S. Persons with ownership or interest (even just signature authority) to file various international information reporting forms each year to disclose their foreign accounts, assets, investments, trusts, entities, and more to the IRS and FinCEN. Two of the most common forms a Taxpayer may file are the FBAR (FinCEN Form 114) and Form 8938 (FATCA, aka Foreign Account Tax Compliance Act). It is important to note that the term ‘U.S. Person’ is not limited to individuals and includes entities as well. Likewise, the requirement is not limited to just U.S. citizens but also dual citizens. In some instances, some U.S. persons may try to avoid filing FBAR – but that does not usually include dual citizens. Let’s take a brief look at the dual-citizen FBAR filing requirement:

Example of a Dual Citizen with FBAR Requirement

Randy is a dual citizen of the United States and a foreign country. He has several foreign accounts in multiple countries that exceed the FBAR reporting threshold but does not live in the United States. Is Randy required to file an FBAR?

The answer is, yes.

Randy is a U.S. Citizen

Since Randy is a U.S. Citizen, he is required to file the FBAR in any year that he meets the threshold requirements for filing the form. Just because Randy is also a citizen of another foreign country (and even lives in a foreign country) does not negate his FBAR filing requirement.

Can Randy make a Treaty Election?

No. Some residents (non-citizens) who are not dual citizens but rather Permanent Residents of the U.S. may try to make an election to be treated as a foreign person, or non-resident alien (NRA) for tax purposes and then claim they are not required to file the FBAR. While the IRS disagrees with this position in their Publication 5569, they did concede to this issue in the case of Aroeste.

What Other Forms Does a Dual Citizen Have to File?

When a Taxpayer has failed to report their foreign accounts, assets, investments, and income to the IRS in previous years, they may become subject to IRS fines and penalties for their non-compliance. Oftentimes, the penalties for international information reporting non-compliance can be very harsh and far exceed the nature of the violation.

Common international reporting forms include:

• • • FBAR

    • Form 3520

    • Form 3520-A

    • Form 5471

    • Form 8621

    • Form 8865

    • Form 8938

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.