Expats from the U.S., who have financial accounts outside the U.S., face legal changes to reporting laws, including a new filing date.
The new due date — April 15 — includes an automatic June 15 extension date with a possible Oct. 15 extension, the Wall Street Journal reports. We say “possible” because the language of the law uses uncertain language, the Wall Street Journal reports.
Americans with non-U.S. financial accounts are required to provide substantial information each year to the U.S. Department of the Treasury, including Fbar, which is now known as the Fincen 114. Changes in the reporting law came into effect July 31.
Previously, the Fincen 114 was due June 30, with no extension. Now, expats get automatic extensions from April 15 to June 15 for filing personal tax returns and often have to file to extend to Oct. 15 or Dec. 15 because of the complexities of complying with tax requirements in their countries of residence as well as the U.S.
So Fincen 114 comes closer to being an ordinary tax form. The Wall Street Journal speculates that it will eventually be combined with the Foreign Account Tax Compliance Act (Fatca) form 8938, which has been urged by the Taxpayer Advocate and several overseas American organizations.
Penalties for not filing can exceed 300% of the highest account balance, but it’s easy to get tripped up under rules that many feel are unfair, much less intrusive to the point of danger. Expats take issue with the filing forms for requiring highly detailed information that in the wrong hands could leave accounts vulnerable to identity theft.
U.S. expats and dual nationals who have financial accounts in the country where they live don’t consider their accounts as “foreign” and would support a Same Country Exception.
Jonathan Lachowitz, the founder of White Lighthouse Investment Management of Lexington, Mass., and Lausanne, Switzerland, warns that U.S. citizens with authority over an employer’s bank accounts in a foreign country may have to report these accounts on their personal Fincen 114.
And Americans who have financial or other authority over a family member’s financial accounts in a foreign country (such as an aging parent or a special needs child) also have a reporting requirement, which represents an additional burden considering they have no financial interest in the accounts, Lachowitz says.
At times, it appears the U.S. government has been intentionally hostile to expats, like when the Treasury Department starting allowing and then requiring electronic filing of the Fincen 114, directing taxpayers to the Financial Crimes Enforcement Network to make their filing. That intimidated and angered some filers,” says Lachowitz, who is a financial planner.
Lachwowitz offers some hope, however.
“… We can take some small comfort that members of Congress and Treasury are becoming aware of the issues and starting to make changes that could make compliance with tax laws a bit easier,” he says.