When it comes to business dealings with the country’s neighbor to the north, borders often get blurred, especially here in Toledo, which is not that far from the border. If you conduct business in more than one country, you will need to account for the income you make from your domestic and foreign sources.
The IRS has specific reporting requirements when a U.S. citizen or permanent resident legally owns real estate, retirement assets or bank accounts in another country with an aggregate value of $10,000 or more.
The FBAR report
If you do own assets or accounts worth over $10,000 outside of the United States at any point during the calendar year, then you will need to file a Report of Foreign Bank and Financial Accounts in accordance with the Bank Secrecy Act. In addition to filing this report each year, the IRS requires you to report any foreign accounts on your income tax return.
If you fail to report income from foreign sources, you could find yourself charged with a crime. The IRS employs investigators who work with foreign governments to track down individuals and businesses suspected of “hiding” income. The consequences of being accused of hiding income, assets and accounts could be severe. In addition to paying more in taxes, you could face fines, penalties and interest. You could even spend time in prison.
It’s important to get it right
Understanding the requirements and the potential consequences is not enough. You also need to be sure that you get it right when it comes to meeting the requirements of the IRS. Any misstep or mistake could put you and your business in jeopardy. The value of your foreign assets could also suffer.
When it comes to taxes, most people want to make sure that they are on the right side of the agency. The tax code can be complicated enough without adding in the need to account for assets earned and owned in a foreign country. It’s about more than just knowing what forms you need to fill out. It’s also about how well and accurately you fill out those forms.
Due to the complexity of this type of tax situation, along with what may be at stake for you or your business, consulting with a tax attorney could help avoid any adverse encounters with the IRS that could result in serious penalties.