2023 Offshore Account Disclosure Compliance: What U.S. Taxpayers Need to Know

It’s a New Year, and that means Tax Day isn’t far away. For U.S. taxpayers who hold offshore accounts, Tax Day brings filing requirements above and beyond submitting an annual income tax return.

The offshore account disclosure requirements exist under two federal laws—the Bank Secrecy Act (BSA) and the Foreign Account Tax Compliance Act (FATCA). While the BSA and FATCA overlap in some respects, their disclosure requirements are different. As a result, U.S. taxpayers may need to comply with one statute, the other or both.

Here is an overview of what U.S. taxpayers need to know in 2023:

What Are the Offshore Account Disclosure Thresholds in 2023?

The offshore account disclosure thresholds under the BSA (which establishes the FBAR filing requirement) and FATCA (which establishes the requirement to file IRS Form 8938) are staying the same for 2023. These thresholds are:

• BSA (FBAR) Offshore Account Disclosure Threshold – The FBAR disclosure threshold is $10,000 for all U.S. taxpayers. Taxpayers residing domestically and abroad must file an FBAR if the aggregate value of their offshore accounts exceeded $10,000 at any point in 2022.
• FATCA (IRS Form 8938) Disclosure Thresholds for Domestic Taxpayers – For taxpayers residing in Virginia and other states, the disclosure thresholds under FATCA are: (i) $50,000 in aggregate value (together with any other “foreign financial assets”) at the end of 2022; or, (ii) $75,000 in aggregate value at the end of the year.
• FATCA (IRS Form 8938) Disclosure Thresholds for U.S. Taxpayers Residing Abroad – For U.S. taxpayers residing abroad, the disclosure thresholds under FATCA are: (i) $200,000 in aggregate value (together with any other “foreign financial assets”) at the end of 2022; or, (ii) $300,000 in aggregate value at the end of the year.

What is the Filing Deadline for Offshore Account Disclosures in 2023?

The offshore account disclosure deadlines are also staying the same for 2023. Taxpayers must file their FBARs by April 15, and they must file IRS Form 8938 with their annual returns (by April 18, 2023). However, all taxpayers receive an automatic six-month extension for both filings.

What Are the Penalties for Failing to File an FBAR or IRS Form 8938?

The penalties for offshore account disclosure violations are substantial. Under the BSA and FATCA, civil fines start at $10,000, but they can increase quickly. If accused of intentionally evading their offshore account disclosure obligations, U.S. taxpayers can also face criminal prosecution.

What If I Didn’t File an FBAR or IRS Form 8938 in 2022?

If you didn’t file an FBAR or IRS Form 8938 in 2022 despite having an obligation to do so, you should discuss your situation with an experienced offshore tax lawyer promptly. While you may have options for remedying the issue voluntarily, you will need to take appropriate action before the IRS initiates an audit or investigation.

Contact Thorn Law Group in Virginia

If you need to know more about offshore account disclosure compliance in 2023, we invite you to get in touch. To request an appointment with offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 703-752-3752, email ket@thornlawgroup.com or contact us online today.