Advice for Expats Who Own Foreign Businesses - FBARs, Form 8938, and More!

Sep 28, 2017

In this post, the FBAR Wiz will provide some helpful information concerning the filing obligations of expats living and working in the United States who own foreign (i.e., non-U.S.) businesses. Before reading on, you may want to quickly determine your own foreign asset filing obligations by using the free and anonymous FBAR Wiz app. If an expat’s foreign business is subject to US corporation tax filing (i.e. the business profits are not reported on the expat’s tax return), and the business account (or accounts) have over $10,000 USD in them at any time during the year, then the business will also have to file an FBAR to declare all of its financial accounts. So the business account may be reported multiple times, by the corporation, the American business owner, and by any other American company officers who have signatory authority or nominal control over the account. Another FBAR reporting scenario that can affect US expats is if they own an American business that has a 50% or more stake in a foreign business that has qualifying accounts. In this case the American parent corporation would have to file an FBAR (as well as the expat if they have any control over the qualifying account. Form 8938 Expats with foreign financial assets worth over $200,000 USD at any time in a year also have to declare them on the Form 8938. As such, if an expat has a foreign business which has more than this in foreign financial accounts at any time during the year, the accounts would have to be reported on Form 8938 as well as on an FBAR. Penalties FBAR penalties for not filing (or for incomplete or incorrect filing) are steep, so it’s important for expats with a foreign business to get to understand and fulfill their FBAR filing responsibilities. If FBAR filing non-compliance is considered accidental, penalties start at $10,000 per year, whereas if it’s considered willful penalties are either $100,000 or 50% of the balance of the accounts that weren’t declared, whichever is greater, and again per year. For helpful tips on how to avoid drawing scrutiny from the IRS, check out this related blog post.