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US Taxes Expats Guide Foreign Financial Reporting Tax Strategy One
Embracing the nomadic lifestyle or settling as an expat in a new country is a dream many chase. The allure of foreign lands, diverse cultures, and the promise of new experiences beckon. Related to US Taxes, expats and digital nomads must navigate the global journey of meeting foreign financial reporting requirements, which is often overlooked by those living and working overseas, which risks large penalties.

US Taxes Expat’s Guide: Foreign Financial Reporting -Tax Strategy One

Ask yourself: Did you get any money or other assets from a country outside the U.S.? Do you own any assets outside the U.S.? Did you move any assets outside the U.S.? Did you have an ownership or management interest in an entity in a foreign country? Suppose you answered yes to any of these questions. In that case, you likely need to catch up on your US Taxes and file additional foreign financial reporting forms with the IRS (or risk hefty penalties).

In addition to filing your U.S. 1040 Tax Return each year (including the right to claim lucrative expat tax-breaks), you may also need to report your foreign financial activities to the U.S. Government. This includes everyday Americans with real estate owned via a foreign entity instead of personally (common in Latin America) or Americans who run small businesses through foreign corporations or foreign LLCs.

The Calendar Conundrum: Tax Filing Deadlines for US Taxes

First things first, circle these dates on your calendar:

March 15

U.S. Partnerships, U.S. Multi-Member LLCs, and Foreign Trusts

April 5

This is a standard tax deadline for those with a U.S. tax home

June 15

If you're living abroad, this is your extended deadline, no form required

October 15

With a simple extension form, this can be your new deadline.

December 15

A special extension for Americans abroad

Being aware of these dates ensures you’re not hit with late penalties. Note: Extensions are only for filing your tax return. It doesn’t provide an extension for any payments due, so it’s best to at least estimate and pay your US Taxes on or before the deadline (if you owe taxes).

For peace of mind, entrust your US tax processes to our partner Tax Strategy One. They can provide expert guidance and assistance to ensure compliance with US tax regulations and maximize your tax benefits.

Global Earnings and Banking Across Borders for US Taxes

The U.S. operates on a global tax system, meaning every cent you earn, whether it’s in New York or New Delhi, must be reported to Uncle Sam. Yes, this applies even if you’ve already paid taxes in another country. 

When it comes to US Taxes and foreign financial reporting, if you have a total of over $10,000 for even a minute during the year in one or more foreign banks, it’s time for the FBAR (Foreign Bank Account Report). It’s essential to remember that this isn’t a $10,000 per account requirement; you need to add up every foreign account when calculating the $10,000 filing threshold, even if it’s related to signing authority rather than ownership. 

This isn’t about paying more taxes; it’s about transparency. What about cryptocurrency? For 2024, a foreign account with only virtual currency doesn’t need to be reported on the FBAR. Here’s a Pro Tip: Make sure to report ANY foreign financial account on your 1040, specifically on part III of Schedule B.

To secure your expat tax benefits, you must file one of the forms listed in our downloadable Guide with your tax return, even if you owe nothing, thanks to the US expat/digital nomad tax breaks.

Medellin Guru Guides

Download the guide The US Expat Tax and Foreign Asset Reporting Guide from Tax Strategy One with helpful information.

FATCA report is essential for accomplishing all the US Taxes’ requirements

The Foreign Account Tax Compliance Act (FATCA) requires U.S. taxpayers with foreign assets over certain thresholds to report them. Download the full guide to see the threshold levels for filing (it depends on your residency and filing status), and if you need to include foreign-based cryptocurrency (this report is separate from the FBAR report above).

Expats and Digital Nomads face a complex web of government reporting requirements about US Taxes
Expats and Digital Nomads face a complex web of government reporting requirements about US Taxes

US Taxes: Reporting Foreign Gifts, Inheritances, and Asset Transfers

If you’ve received a substantial gift or inheritance from someone abroad, it’s essential to note that there are reporting requirements. Failing to report, even if you don’t owe taxes, can have costly consequences.

Furthermore, when transferring assets to a foreign country, whether for purchasing property or moving funds, these transfers often need to be reported. This reporting is essential to assure the U.S. Government that you’re not engaging in tax evasion practices and is an integral part of ensuring compliance with taxes.

International Business Tycoon: US Taxes related to the ownership in Foreign Entities

The U.S. government is also interested if you’re dabbling in business activities abroad. So they’ve created a range of forms for foreign corporations, partnerships and LLCs that might be part of your tax filing routine–this can also include being a director or officer of a foreign entity (no ownership required)

These forms are complex, and when meeting threshold filing requirements, you’ll typically need to count any shares in the calculation owned by family members or through any business, trust, or partnership connected to the shareholders. This includes, for example, when a U.S. expat is married to a non-U.S. taxpayer (e.g., a Panamanian wife) who owns a Panama corporation–the U.S. expat must report this indirect ownership interest in her foreign company (just as if he owned the company directly).

Diversifying Abroad

Foreign Trusts and Foundations

Got interests in foreign trusts or foundations? You'll need to file several forms. This ensures the U.S. government knows about potential income or distributions from these entities.

Foreign Mutual Fund Issues

Avoid owning foreign mutual funds. Instead, look for US-based funds that hold foreign assets. Why? Under the tax code, foreign mutual funds generally fall under the passive foreign investment corporation (PFIC) taxation rules.

Foreign Insurance Policies

US imposes little-known excise taxes on many amounts you pay in premiums to a foreign insurance company for each policy of insurance, indemnity bond, and annuity contract. In addition, if a policy has a cash value, it's likely also reportable.

To ensure your financial affairs are in order and to maximize potential benefits, consider enlisting the expertise of our trusted partner, Tax Strategy One. Their professional guidance can provide peace of mind and ensure compliance with the laws.

The Bigger Picture of US Taxes: Potential Penalties and Relief

You might wonder why the U.S. government is keen on knowing about your foreign financial affairs. The primary reason is to curb tax evasion. By requiring U.S. citizens and resident aliens to report their foreign financial activities, the government ensures everyone pays their fair share of taxes. With the rise of digital nomads and the ease of global financial transactions, it’s easier than ever for money to flow across borders, making these reporting obligations even more crucial.

Non-compliance with reporting requirements can result in penalties, sometimes quite hefty, for not filing these little-known forms. Yet, there are solutions for non-filing (and incorrect filings). Talking to your international advisor ahead of time can help you file accurately and on time, preventing problems with the IRS. For example, suppose you fail to file Form 5471 (related to foreign corporations). In that case, your penalty is $10,000, which can be as much as $50,000. This can be an annual penalty.

About Tax Strategy One

For over twenty five years, the consultants at Tax Strategy One have designed and perfected strategies and opportunities. Their mission is to simplify financial and lifestyle choices.

They help clients navigate the complexities of US tax laws, as there are little-known IRS rules and reporting requirements when ‘going international.’ Clients face penalties—sometimes hefty ones—as well as losing beneficial tax-breaks for not complying with these regulations.

Tax Strategy One in Partnership with Medellin Guru since 2023
Tax Strategy One in Partnership with Medellin Guru since 2023

Tax Strategy One advises clients to get their own professional plan in place from their experienced international strategists. It’s time for a better plan. Tax planning and preparation should never be just a once-a-year activity.

They aim to maximize the financial resources available to your business as it grows, and their services aim to reduce the amount you pay over the years. At Medellin Guru, we recommend the services of Tax Strategy One to all our readers. Contact them and get personalized advice.

Medellin Guru's Comprehensive Tax and Visa Series

If you want to know more about these and other ways to avoid fees and penalties, download the Tax Strategy One guide “US Expat Tax and Foreign Asset Reporting.” It provides the needed knowledge on U.S. deadlines, forms, and filing solutions.

Medellin Guru Guides

Download the guide The US Expat Tax and Foreign Asset Reporting Guide from Tax Strategy One with helpful information.

Also, we leave you some related articles:

The Colombian visa changes that went into effect in mid-October 2022 were significant. So, on the Medellin Guru site, we have a comprehensive series of visa articles that are kept up-to-date and should answer most visa questions. These articles include:

We have looked in detail at the seven most popular Colombian visas used by foreigners:

  1. Digital Nomad Visa
  2. Retirement visa
  3. Marriage visa
  4. Investment visa
  5. Resident visa
  6. Work visa
  7. Student visa
  8. Visitor visa
  9.  Digital Nomad Visa

Also, we have looked in detail at three additional Colombian visas, which are less popular for foreigners:

In addition, we have a guide to Colombia tourist visas and how to extend a tourist visa. Also, we have a guide to renewing U.S. passports in Colombia and a guide to obtaining a Colombian passport.

Furthermore, we provide information about travel insurance that meets the insurance requirement for Colombian visas. And we have a guide to how apply for a cedula extranjeria in Colombia and a guide to using notaries in Medellín and Colombia. Finally, Medellin Guru has partnered with a visa agency to offer Colombia visa services.

All of our Colombia visa articles were updated in early 2022 to ensure they are up-to-date and will be updated again in 2023. In addition, all visa articles on this website will be kept up-to-date as new details are disclosed.

The Botton Line: US Taxes Expat’s Guide: Foreign Financial Reporting -Tax Strategy One

Being a U.S. expat or digital nomad is exhilarating, but with great adventures come responsibilities. While this list might seem overwhelming, remember knowledge is power. 

The takeaway? Every adventure comes with its map. Ensuring you’re charting your financial course correctly can make all the difference. Safe travels!

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