Do Taxes Apply to Foreign Accounts Held Before Entering the U.S.?
If you’re planning to move to the United States and have foreign bank accounts, you may wonder if U.S. tax laws apply to those accounts. The short answer is yes—foreign assets, including accounts held before entering the U.S., are subject to U.S. tax reporting requirements once you become a resident. The right tax attorney in Atlanta can provide valuable guidance to ensure full compliance with U.S. tax laws regarding accounts for those uncertain about meeting these obligations.
Tax Reporting Obligations for Foreign Accounts
The U.S. tax system is based on citizenship and residency, meaning that U.S. residents are taxed on worldwide income. This includes income from foreign accounts and investments, even if these accounts were opened prior to entering the U.S. The Foreign Account Tax Compliance Act (FATCA) mandates that U.S. residents with foreign financial assets exceeding certain thresholds must report them to the IRS. Additionally, if the total value of your foreign accounts exceeds $10,000 at any point during the year, you must file a Report of Foreign Bank and Financial Accounts (FBAR). Failing to comply with these requirements can result in hefty penalties.
It’s important to note that even if you don’t earn any income from your accounts, simply holding them may trigger reporting obligations under both FATCA and FBAR. FATCA applies not only to bank accounts but also to foreign stocks, bonds, and mutual funds, broadening the scope of what needs to be reported.
Failing to file an FBAR can lead to penalties ranging from $10,000 for non-willful violations to significantly higher penalties for willful violations. Moreover, the IRS has increasingly focused on foreign account reporting, making it crucial for U.S. residents with foreign assets to comply with these rules to avoid costly consequences.
Take Control of Your Foreign Tax Obligations
Dealing with foreign account reporting can be challenging, but the Law Office of Max Benkel is here to help. With over 35 years of experience, Max Benkel’s personalized approach to tax issues can ease your burden. Contact us today for a consultation to understand how we can assist you with your foreign account tax filings.