Foreign Asset Reporting

US taxpayers with financial accounts or assets held outside the United States face extensive reporting obligations that carry some of the most severe penalties in the tax code. The failure to properly disclose foreign financial accounts and assets can result in civil penalties of $10,000 or more per violation -- and willful violations can reach $100,000 or 50% of the account balance, whichever is greater, plus potential criminal prosecution. At Lanphier LLP in Denver, we take foreign asset reporting seriously and help our clients navigate these requirements with precision and care.

Many Denver-area residents with international connections -- including new US residents, expatriates, dual citizens, and individuals with inherited foreign accounts -- are subject to these requirements without fully realizing it. The reporting thresholds are lower than most people expect, and the definitions of what constitutes a reportable account or asset are broader than many assume. Our team works with clients to identify all reportable accounts and assets, prepare the required filings accurately, and develop systems to ensure ongoing compliance year after year.

Key Foreign Asset Reporting Requirements

FBAR -- FinCEN Report 114

The Report of Foreign Bank and Financial Accounts (FBAR) must be filed by any US person who has a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year. The FBAR is filed electronically with FinCEN (not the IRS) and has its own deadline -- April 15, with an automatic extension to October 15. We prepare FBARs for our clients and ensure that all accounts are properly identified and reported, including accounts that are easily overlooked, such as foreign pension plans, life insurance policies with cash value, and accounts held through foreign entities.

Form 8938 -- Statement of Specified Foreign Financial Assets

Form 8938, required under the Foreign Account Tax Compliance Act (FATCA), is filed with the annual income tax return and reports specified foreign financial assets -- including bank accounts, securities, partnership interests, and certain other financial instruments. The reporting thresholds vary based on filing status and whether the taxpayer lives in the US or abroad. Form 8938 overlaps with the FBAR but is not identical; both must be filed when thresholds are met. We coordinate these two filings to ensure consistency and completeness.

Other Foreign Asset Disclosures

Beyond the FBAR and Form 8938, US taxpayers may be required to file additional information returns related to foreign assets, including Form 3520 (foreign trusts), Form 5471 (foreign corporations), Form 8865 (foreign partnerships), and Form 8621 (passive foreign investment companies). Each of these forms has its own filing requirements, thresholds, and penalty provisions. We review each client's full international profile to identify every applicable requirement.

Delinquent Filing and Penalty Abatement

If you have failed to file required foreign asset reports in prior years, the IRS offers several programs for coming into compliance, including the Streamlined Filing Compliance Procedures and the Delinquent FBAR Submission Procedures. These programs can significantly reduce or eliminate penalties for taxpayers who can demonstrate that their failure was non-willful. We have helped numerous clients in the Denver area and throughout Colorado use these programs to resolve past noncompliance and move forward with a clean record.

If you have foreign financial accounts or assets and are unsure whether you are meeting your US reporting obligations, contact our Denver office for a confidential consultation. The cost of compliance is a fraction of the penalties for noncompliance.