Serving internationally, it’s important to know what the rules are surrounding foreign accounts and assets. I’m not a CPA but I’ve spent some time researching tax laws and IRS reporting requirements. As tax season is in full swing, I thought fellow missionaries might be interested in what I’ve discovered.
You may be aware that back in 2003 the IRS instituted a reporting system for any American who had bank accounts overseas. If you have had $10,000 or more in such an account at any time during the year, or have had control over the money and your signature is required for transactions, you are required to report that to the IRS. The FBAR (Foreign Bank and Financial Accounts) as it’s called, is part of the Bank Secrecy Act intended to combat money laundering and other illegalities. You’ll report this information on form TD F 90-22.1 and it is not considered confidential since it is shared among governmental agencies. Reporting is done by June 30th each year for the previous year.
Furthermore, as of March 2012, if you have assets in your country of ministry in bank accounts, stocks, bonds, other securities, or interest in financial institutions meeting IRS guidelines, then Form 8938 should be filed with your tax return. The purpose of this form is to help the IRS track tax evasions by individuals with money in foreign accounts. For most individuals or couples, reporting is necessary if you have assets of between $50,000 and $600,000. Most of us probably don’t have that much in assets, but it’s worth noting just in case you, or someone you know does.
If you have a bank account and a large amount of assets in a foreign bank you will be required to file both forms. If you have missed filing either of these forms, or aren’t sure if you qualify to file, talk to your accountant or check this IRS page. You can make up reporting if you failed to report out of ignorance, but you will still be liable for any penalties or, in the case of Form 8938, taxes that were owed.
If your country of ministry has a good banking system, then the way around these forms is to keep your money in a US bank, like ECCU, and withdraw funds as they are needed at an ATM in your country. This avoids keeping reportable funds in foreign banks, and keeps you further off the IRS radar.
About Cindy Martin:
Cindy and her husband Bill minister as Bible school and seminary teachers in Latvia, Estonia, and Finland. Cindy served as CFO at a Bible school in Latvia, and has always been interested in personal finances, especially accounting and IRS reporting. The Martins also teach at the Indian Bible college in Flagstaff, AZ. Before they began cross-cultural ministry, they served as pastors of Bethel Bible Church in Evergreen Park, IL for 9 years.
This post is provided by ECCU for educational purposes only. It is not intended to be tax or accounting advice. ECCU disclaims any liability arising out of your use of or any financial position taken in reliance on information provided in this post. Consult a tax professional concerning your own specific tax circumstances.