CapRelo Blog

IRS Initiates Policy Changes Regarding Tax Reporting for Expats Living Abroad

Posted by Amy Mergler on Thu, Feb 11, 2016

taxes.jpgMoving and living abroad can result in complicated situations—especially where finances are concerned. For the estimated 335,000 expat U.S. citizens who earn an income overseas, it can be even more complicated than for other nationalities, since the United States is the only country that requires its citizens to file overseas income taxes on peril of losing citizenship.

The Foreign Account Tax Compliance Act

In 2010, the Foreign Account Tax Compliance Act (FACTA) was created in order to flush out tax evaders who failed to declare overseas income or capital. According to the IRS, U.S. taxpayers who have signature authority or a financial interest over one or more overseas bank accounts must use Form 8938 to report these assets, and it should be attached to their annual income tax return (typically Form 1040). If the total value is below $50,000 at the end of the tax year, the taxpayer doesn’t have to report the income unless the value exceeded $75,000 at any time during the year. The threshold is higher in some cases and is different for married and single taxpayers. 

In addition to Form 8938, any United States taxpayer with financial interest or signature authority over at least one overseas financial account must file an FBAR form if the aggregate value of said accounts exceeds $10,000. It’s important to realize that the FACTA regulations also apply to U.S. expats who return to their homeland, but who still hold overseas bank or financial accounts. However taxpayers who aren’t required to file an income tax return for the tax year also aren’t required to complete Form 8938.

Additionally, the FACTA reporting obligation also affects taxpaying expats from other countries who are living in the United States. Many immigrants have bank accounts in their homeland, even if they don’t use them after moving to the U.S. As of this year, they need to review their accounts and determine whether they need to be reported. 

Penalties for not complying with the FACTA regulations are severe. The penalty for failure to file Form 8938 is up to $10,000 for failure to disclose, plus an additional $10,000 for each 30 days of non-filing after the taxpayer receives the IRS notice of failure to disclose (max. $60,000). In some cases the IRS may impose criminal penalties as well.  For non-willful failure to file FBAR, the penalty is up to $10,000. If willful, the penalty is up to $100,000 or 50%, whichever is greater, and criminal penalties can also apply.

What makes this so relevant now is that as of this year, the IRS has more stringent methods to enforce these regulations. It has formed alliances with over 100 countries, establishing a requirement for financial institutions in those countries to report any accounts belonging to U.S. citizens, U.S green card holders and U.S. expats.

And that brings us to the other aspect of this situation that makes life for U.S. expats difficult. If a bank fails to report even one single person, the U.S. Department of Treasury could fine the institution as much as 30 percent of its U.S. income. This means that U.S. citizens are high-risk customers, and many banks and other financial institutions around the world are reluctant or unwilling to work with them.

Corporate Relocation Companies Can Help

Fortunately, experienced corporate relocation companies like CapRelo can be of assistance to U.S. expats moving and living abroad. Corporate relocation companies often have a network of banks, lenders and other financial institutions that possess the infrastructure and knowledge to work with U.S. customers. In addition, they can assist in finding international tax specialists who can help ensure expats meet all of their tax reporting obligations.

In conclusion, FACTA certainly makes financial matters more complicated for those living abroad. But by being aware of the reporting requirement and knowing how to find the right kind of help, expats can still have a valuable, enjoyable overseas experience.



Although this written communication may address tax issues, it is not a covered opinion as described in Circular 230.  Therefore, to ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication (including any attachments), unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.

Topics: tax impact of relocation, relocation taxes, expats

Advice for Expat Children Applying to Colleges

Posted by Jim Retzer on Tue, Mar 03, 2015

College-Application-FormFor expat young people considering attending college (in the USA), many of the same conditions apply to expats and other foreign students as well as their stateside peers. One advantage expats may have is exposure to a broader range of cultures: many schools consider the expat’s foreign living experience a big ‘plus’ when considering applications, as they are often more mature and adaptable to change.

Learn more about global assignments with our free guide.

Finding a school

Overseas transferees and Foreign Service families will find abundant information online, including taking ‘virtual tours’ of prospective campuses, downloading academic information, applications and other considerations. Non-citizen students need to know that many of these post-secondasry school websites also have additional sections containing information about special admission requirements for non-citizens.

The application process

Most US high school students who plan to attend college apply to more than one school due to the variations in selectivity among colleges, with an average of three to five schools – as should ex pat students. Many schools have deadlines months in advance, so apply as soon as possible.

Although colleges will also vary in the type of forms needed, as a rule close to 400 of the more selective institutions use the Common Application (also called ‘CA’) forms, asking for records of school grade reports, including high school, a personal essay, and extracurricular activities as well as at least one letter of recommendation from a high school teacher.

State vs. private schools

Most state-funded schools don’t use the CA mentioned previously, but the more selective the school (such as the highly-regarded University of California at Berkley) the more stringent will be the admission requirements. State schools also favor their own state’s residents when admitting new or transfer students: many have minimum resident student quotas which they must meet for funding. If a student’s family has retained their residency status, schools in the ‘home state’ could be good options. Most state colleges offer lower tuition, even for out-of-state students, than do private schools.

Tests and other academic records

While there is no one standard college test in the U.S. many schools require successful completion of the ACT (American College Testing Program) or the College Board tests (also referred to as Standardized Achievement Tests, or SATs). While the SATs are in wider use, more selective schools are asking for scores from both.

High scores on a student’s International Baccalaureate tests and Advanced Placement tests may permit college freshman students to ‘place out’ of required lower-level core classes, moving ahead faster.

Other documents prospective foreign or expat college students may need:

  • Student visa – this will be necessary if you are a long-term resident of or a citizen of a foreign country. This will also include the need to show proof of ability to pay tuition; otherwise, the student must apply for financial aid as soon as possible.

For all students, embarking on the adventure of higher education offers the same promise of discovery and lifelong learning as it has for generations.

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Topics: expats, expatriate employees

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