By Mark A. Josephson, Esq., CPA, CFP, CFE, CGMA

(Note from Sara: New York is an international city and several people have asked what they are supposed to be doing with accounts they have either left behind overseas or inherited. I do not prepare tax returns, so I’ve asked Mark to step in and point us in the right direction!)

Are You a U.S. Citizen or Resident with Foreign Financial Assets?

Over the past several years one of the Internal Revenue Service’s top priorities has been to increase compliance with offshore tax payment and reporting obligations. According to the U.S. Treasury Department, reporting of foreign accounts has increased approximately 17% per year during the previous five years.

In 2015, FinCen (Financial Crimes Enforcement Network) reported a record breaking 1,163,229 FBARs (Foreign Bank and Financial Report) filed. Through various taxpayer offshore compliance programs, as of June 2014, the IRS has brought in almost $6.5 billion of tax and penalties. In 2015, in accordance with FATCA (Foreign Account Tax Compliance Act), the IRS began exchanging financial account information with certain foreign financial institutions.

Increases in enforcement and additional information exchange with foreign financial institutions mean offshore financial accounts will less likely go unnoticed by the IRS.

Who Needs to Report Foreign Accounts for U.S. Taxes?

For tax purposes, a U.S. person includes U.S. citizens, “resident aliens” and domestic corporations. The United States taxes the “worldwide” income of “U.S. persons”. In addition to worldwide taxation, when certain criteria are met, U.S. persons must disclose information regarding Foreign Financial Assets held.

A non-US citizen is a resident alien for purposes of U.S. income tax law if he/she has been granted a green card and is a lawful permanent resident of the United States, or meets the “substantial presence test”.

An alien meets the substantial presence test if physically present in the United States for at least 31 days during the current year and a total of 183 days during the three-year period (based on a prescribed IRS formula) that includes the current year and the two preceding years. The current year is the calendar year for which substantial presence is being determined. Special rules apply for determining when residency starts or terminates.

What Foreign Financial Assets Need to be Reported?

Among the most common foreign financial assets that may be reportable include:

  • foreign bank accounts
  • foreign brokerage accounts
  • certain foreign life insurance
  • certain foreign private pensions
  • foreign mutual funds
  • other IRS “specified financial assets”

How to Comply

One of the most common disclosures is the reporting of foreign bank and financial accounts. All U.S. Persons with a financial interest in or signature authority over one or more foreign financial accounts with an aggregate value greater than $10,000 must file FinCEN – Form 114, commonly known as the FBAR.

Another frequently required filing is the Statement of Specified Foreign Financial Assets, Form 8938. This form is required to be filed when the value of “specified financial assets” exceeds certain thresholds. Reporting thresholds vary based on if you are single or married and whether you live in the U.S. or abroad. For a single person living in the U.S., this filing is required when “specified” asset values are $50,000 or more at the end of the year (or $75,000 at any time during the year). For married persons the filing threshold when living in the U.S. is $100,000 or more at the end of the year (or $150,000 at any time during the year).

Special reporting may also apply to certain ownership interests in foreign entities such as Corporations, partnerships and disregarded entities. Additionally reporting may also apply to certain foreign trusts, inheritances and gifts.

What to Do if Not in Compliance?

Depending on the nature of non-compliance, it may be as simple as filing original or amended returns to report the required information. (Note from Sara: this is a good time to get an accountant if you don’t have one already!)

If this avenue is not available or poses a high risk for the imposition of penalties, there are various Internal Revenue Service programs currently available to come into compliance, including:

  • “Streamlined Compliance Procedures”
  • “Foreign Streamlined program for non U.S. residents”
  • “Streamlined Domestic” program for U.S. Citizens and Residents
  • Offshore Voluntary Disclosure Program (OVDP)

Entering these program may reduce applicable penalties and avoid the risk of criminal implications. Serious consideration should be given to coming into compliance. If the IRS notifies you before you notify them, the door to the preferential disclosure options may close, leaving you faced with additional tax penalties and notifications.


Mark Josephson, CPA

Mark A. Josephson Esq, CPA, CFP, CFE, CGMA, is a founder and senior partner of Murray & Josephson, CPAs, LLC. He is a member of the bar in the states of New York, New Jersey and Florida. In addition to his CPA and law degree, Mark has earned a certification in Financial Planning from the College for Financial Planning, is a certified fraud examiner and member of the Association of Fraud Examiners, and is certified as a chartered global management accountant. Visit Murray and Josephson, CPA’s LLC at


Disclaimer: This material is designed to provide general information prepared by professionals in regard to the subject matter covered. Although prepared by professionals, this material should not be utilized as a substitute for professional services in specific situations. Due to the certainty of continuous current developments, this material is not appropriate to serve as the sole authority for any opinion or position. It must be supplemented for such purposes by reference to other current authoritative materials. If legal advice or other expert assistance is required, the services of a professional should be sought.

Copyright 2016
Murray and Josephson CPA’s LLC
425 Madison Avenue 9th Floor
New York, N.Y. 10017

This article is for informational purposes only.  The Stanich Group LLC does not provide tax advice. Consult your tax advisor.

Sara Stanich

Sara is a CERTIFIED FINANCIAL PLANNER™ practitioner, Certified Divorce Financial Analyst, and founder of Cultivating Wealth.

She lives in Montauk, NY with her husband, 3 kids and Labrador puppy.
Sara Stanich

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