Your US Tax Obligations as an Expat
Moving to Europe doesn’t exempt Americans from US tax obligations. The United States operates a citizenship-based taxation system, meaning you must report worldwide income and foreign accounts regardless of where you live. Two reporting requirements, FATCA and FBAR, catch many expats off guard, and the penalties for non-compliance are severe.
The Foreign Bank Account Report (FBAR) requires reporting foreign accounts exceeding $10,000 at any point during the year, whilst the Foreign Account Tax Compliance Act (FATCA) kicks in at higher thresholds but demands more detailed disclosure. Penalties can reach $12,921 per account for willful FBAR violations, so knowing what you owe is worth your time.
FBAR Reporting Requirements and Thresholds
The FBAR applies when your combined foreign financial accounts exceed $10,000 at any time during the calendar year. This threshold includes all accounts: checking, savings, investment accounts, and even signatory authority on business accounts. The calculation uses the highest balance reached, not year-end figures.
You must file FinCEN Form 114 electronically through the BSA E-Filing System by 15th April, with an automatic extension to 15th October. Unlike tax returns, you can’t request additional extensions for FBAR filings. The form requires detailed account information including financial institution names, addresses, account numbers, and maximum balances during the year.
Common accounts requiring FBAR reporting include European bank accounts, investment portfolios with local brokers, pension schemes where you have current access, and accounts where you hold signatory authority. Many expats overlook joint accounts with European spouses or business accounts where they’re authorised signatories.
FATCA Compliance for Higher-Value Accounts
FATCA reporting through Form 8938 applies at higher thresholds and requires filing with your tax return. For married filing jointly taxpayers living abroad, the threshold is $400,000 on the last day of the year or $600,000 at any time during the year. Single filers face lower thresholds of $200,000 year-end or $300,000 maximum balance.
Form 8938 demands more disclosure than FBAR, covering asset categories, maximum values, income generated, and whether you disposed of assets during the year. It goes beyond bank accounts to include foreign stocks, bonds, insurance policies with cash value, and interests in foreign entities.
FATCA also created the global reporting network where European financial institutions report American account holders directly to the IRS. Your European bank likely already shares your account information with US authorities, which makes non-compliance straightforward to detect.
Penalties and Compliance Strategies
FBAR penalties range from $12,921 per account for non-willful violations to the greater of $129,210 or 50% of the account balance for willful violations. FATCA penalties start at $10,000 for failing to file Form 8938, increasing by $10,000 every 30 days up to $60,000 maximum.
The IRS does offer relief programmes for expats with unreported accounts. The Streamlined Foreign Offshore Procedures allow compliant filing of three years’ returns and six years’ FBARs with reduced penalties for non-willful violations. You’ll need to certify that failures were non-willful and pay any taxes owed.
Managing multiple European accounts complicates compliance. Double tax treaties provide some relief through foreign tax credits, but don’t eliminate reporting requirements. Many expats find it helps to consolidate accounts and work with advisers who understand both US obligations and European regulations.
On the practical side, keep detailed records of account openings, closures, and maximum balances throughout the year. Currency conversion uses Treasury Department rates published annually, and you must convert all foreign currency amounts to USD for reporting purposes. It’s also worth looking at offshore investing structures that may simplify reporting whilst maintaining investment flexibility.
How We Can Help
International Wealth Ventures provides dual-licensed advisory for Americans in Europe, helping you navigate FATCA and FBAR compliance whilst managing your 401(k), IRA, and brokerage accounts. Our team understands the intersection of US tax obligations and European residence, offering strategies to maintain compliance whilst optimising your investment structure. Contact our US expat team for guidance on reporting requirements and account management solutions.
