IRS Reminds Taxpayers With Foreign Assets To File Returns

The Internal Revenue Service (IRS) has reminded American citizens and resident aliens, including those with dual citizenship, who have lived or worked abroad during all or part of 2014 that they may have a US tax liability and a filing requirement in 2015.

The agency pointed out that a filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit, that may substantially reduce or eliminate their US tax liability. These tax benefits are not automatic and are only available if an eligible taxpayer files a US income tax return.

The IRS said that the tax return filing deadline is June 15, 2015, for US citizens and resident aliens living outside the United States and Puerto Rico. To use this automatic two-month extension (from the standard April 15 deadline), taxpayers must attach an explanatory statement to their return.

Nonresident aliens who received income from US sources in 2014 also must determine whether they have a US tax obligation. The filing deadline for nonresident aliens can be April 15 or June 15 depending on the sources of their income.

The IRS noted that US citizens and resident aliens are required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. Certain taxpayers may also have to fill out and attach to their return a statement of their foreign financial assets, as the return asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires US citizens to report the country in which each account is located.

Separately, those taxpayers with foreign accounts whose aggregate value exceeded USD10,000 at any time during 2014 must electronically file a Report of Foreign Bank and Financial Accounts (FBAR). The FBAR should be forwarded to the Treasury Department by June 30, 2015, and must be filed electronically.

In addition, certain taxpayers may have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, US citizens, resident aliens, and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeded USD50,000 on the last day of the tax year, or USD75,000 at any time during the tax year (higher threshold amounts apply to married individuals filing jointly and individuals living abroad).

The IRS also reminded taxpayers that it has eliminated a special annual reporting requirement that has long applied to taxpayers who hold interests in either of two Canadian retirement plans. As a result, many Americans and Canadians with registered retirement savings plans and registered retirement income funds no longer need to report these details. However, this change does not affect any other reporting requirements that may apply.