It is well known that Green Card holders are United States Residents for income tax purposes and thus subject to US-taxation on their worldwide income. Taxpayers may be able to avoid US taxation through Tie-Breaker-Rules found in Tax Treaties, though this may place the green card in jeopardy.
Less known is that under the Bank Secrecy Act of 1970, all US citizens or residents must annually file Form TDF 90-22.1, Foreign Bank Account Reporting Form (“FBAR”) to report all foreign financial accounts if their aggregate value exceeds $10,000 at any time of the year. Failure to file this form carries stiff civil penalties and potential criminal sanctions. Even non-willful failures carry a $10,000 penalty.
The Regulations provide that a resident under tax laws is also considered a resident for FBAR purposes. Unfortunately, for FBAR purposes, residency tie-breakers under an Income Tax Treaty are ignored and thus, while possibly being able to avoid US Taxation on worldwide income because of a treaty election, taxpayers are still required to file FBARs (and various other Information returns) and may be subjected to penalties for failing to do so.
Because many people were not aware of their filing obligations, the Internal Revenue Service offers varied programs that allow taxpayers to become compliant. The IRS has signaled that the time to come forward and cure these delinquencies is now.
Disclaimer: This Article is intended for general information purposes only and is not intended as legal advice. Each circumstance is unique and especially in the area of FBARs and Voluntary Disclosures, the advice of a licensed attorney can be invaluable