U.S. taxpayers who have foreign accounts that have aggregated more than $10,000 in 2022 and/or 2023 are required to file a report of Foreign Bank and Financial Accounts (FBAR). The IRS has issued new guidance for these forms and is in the process of implementing additional reporting requirements for those with foreign holdings.
In summary, the implemented and anticipated changes include:
- Automatic extension of FBAR filing deadline to October 15, 2023, with no taxpayer action required.
- Reduced penalty for FBAR non-compliance, due to a February 2023 ruling by the US Supreme Court (Bittner v. United States) that the maximum $10,000 penalty for willful failure to file applies per report, rather than per account.
- Additional reporting requirements for partnerships, which are required to provide more detailed information regarding foreign activity on Schedules K-2 and K-3, effective with tax year 2022.
- Potential required registration with a new federal database for individuals who own a 25% or greater stake in foreign entities. This is intended to make it easier to identify people who conceal their identities to cover up illicit activity. This requirement will take effect for tax year 2023. The IRS has not yet provided tax professionals with detailed guidance.
If you have any questions or concerns about these or other issues related to your foreign investments, your AKM team is happy to assist you. Contact your AKM partner or Tax Manager Brett Scharg (bscharg@akmcpa.com).