There’s been a lot of discussion lately about foreign bank accounts.  A recent court case settled criminal charges on a man for not reporting his foreign bank accounts to the US government.   This is big—it used to be that the fines and penalties were very stiff, but criminal charges are even worse.

 

A question that I’ve been getting lately is this:

 

“I’m a US resident alien, I am not a citizen.  According to the IRS Publication number 17, US Citizens have to report foreign bank account, but it doesn’t say anything about resident aliens. So do I still have to report?”

While I think that the wording in the Publication 17 is an excellent argument for not reporting, I know that the IRS expects resident aliens to report their foreign bank accounts and pay income tax on the earning of those accounts.  Even though IRS publication 17 expressly refers to US citizens, other IRS publications refer to “US persons.”

 

According to the IRS, as US person is:

 

“United States person means U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.”

I copied that right off the IRS website so that’s not an interpretation of the meaning, that’s the IRS definition.

 

My experience has been that the IRS does expect foreign nationals living in the US and filing a regular 1040 income tax return to report foreign income and foreign bank account holdings.

 

My advice is that you are considered to be a US resident for income tax purposes; you need to report your foreign bank account earnings and holdings.  The fines and penalties are very high, and the new court case involving criminal penalties makes the risk of not reporting that much higher.

 

If you have not been reporting your foreign bank accounts, but should have, you can apply for the Offshore Voluntary Disclosure Program.  It allows you to go back and report those accounts from past years and pay the tax and reduced penalties.  While the penalties for the Offshore Voluntary Disclosure Program are steep, they’re still much lower than if the IRS “catches” you not reporting.  The fewer years that are involved, the lower the penalties will be.