Nowadays, you can perform international business with the click of a mouse. You can make money investing in a factory or in businesses overseas, sure. But you must disclose your profits and assets to the IRS. If you’re disclosing foreign assets, you need a plan.

Navigating the IRS rules on reporting overseas assets can be tricky. The first tip to keep in mind is that hiring a tax attorney is the best way to get in compliance with the IRS. Working with a tax professional is another way of getting in the IRS’s good graces with your overseas finances.

Your Guide to Disclosing Foreign Assets

Reporting your overseas financial assets is now a must. But the IRS isn’t simply taking international tax scofflaws very seriously. More and more nations are entering treaties with the United States. These treaties often automatically reporting Americans’ overseas financial assets to the U.S. government.

But not all international finances and/or assets need to be reported on IRS Form 8938, or on FinCEN Form 114.

Overseas Finances Subject to IRS Reporting Requirements

If the total sum of your financial holdings overseas is more than $50,000, the Foreign Account Tax Compliance Act requires you to list them on Form 8938, which can be turned in with a tax return. However, you don’t need to file a Form 8938 if you don’t need to file a tax return in any given year. It doesn’t matter how lucrative the foreign assets are.

Depending on the type of assets, if they exceed $10,000 in any given tax year then they will have to be reported on Form 114, Report of Foreign Bank and Financial Accounts (FBAR). FBAR reporting applies to taxpayers with a financial interest in, or signature authority over, an international financial account.

The assets you must report for FBAR and for Form 8938 are similar. But they differ in multiple ways. Different definitions apply to each reporting instrument.

Accounts held at a foreign branch of a U.S. financial institution need to be reported for FBAR, but not on Form 8938. Foreign stock or securities that aren’t held in a financial account, as well as an interest in a foreign partnership, don’t have to be reported for FBAR purposes, but need to be reported on Form 8938. Foreign hedge funds have to be listed on Form 8938, but not on the FBAR.

If you have mutual fund located overseas, it’ll have to be reported on Form 8938. You’ll also report foreign-issued life insurance and foreign private equity funds. You don’t need to report stacks of any foreign cash owned by a U.S. taxpayer on Form 8938, though. The IRS views safe deposit boxes held overseas the same way.

Disclosing Foreign Assets: Get Help Today!

There’s a bunch of nuances, so make sure to work with an experienced tax attorney to make sure you’re compliant. Doing business overseas can be a smart move. But becoming compliant with the IRS for overseas assets and back tax debt is even smarter.