A Brief Update on Filing Requirements for U.S. Citizens Living Abroad and Resident Aliens in the United States

By:
R. John Smith, Esq.
Published Date:
Oct 1, 2016
Who has to file Form 1040NR? 

Form 1040NR may need to be filed if a specified individual is a nonresident alien engaged in a trade or business in the United States, represented a deceased person who would have had to file Form 1040NR, or represented an estate or trust that had to file Form 1040NR. See the form’s instructions for more information.


Information Reporting About Employer Offer of Coverage

If someone in a specified individual’s family was an employee in 2015, the employer may be required to send a Form 1095‐ C. Part II of Form 1095‐C shows whether the employer offered health insurance coverage and, if so, information about the offer. This information may be relevant if the individual purchased health insurance coverage for 2016 through the Health Insurance Marketplace and wishes to claim the premium tax credit on line 65.

Form 8938, Statement of Specified Foreign Financial Assets

Unless an exception applies, specified individuals must file Form 8938 if he or she has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold.

Specified individuals are any of the following:

  • a U.S. citizen
  • a resident alien of the United States for any part of the tax year
  • a nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return
  • a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico
  • individuals treated as resident aliens for U.S. tax purposes under the Green Card test or the substantial presence test

The Form 8938 reporting requirements have changed for dual resident taxpayers holding specified foreign financial assets and taxed for all or a portion of the tax year as a nonresident alien under Treasury Regulations section 301.7701(b)-7. In that case, Form 8938 would be filed as follows:

  • A specified individual filing as a nonresident alien at the end of his or her taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the taxable year covered by Form 1040NR or Form 1040NR-EZ, provided there is compliance with the filing requirements of Treasury Regulations section 301.7701(b)-7(b) and (c), including the requirement to timely file Form 1040NR or Form 1040NR-EZ, as applicable, and attach Form 8833.
  • A specified individual filing as a resident alien at the end of his or her taxable year is not required to report specified foreign financial assets on Form 8938 for the portion of the taxable year reflected on the schedule to Form 1040 or the schedule to Form 1040EZ, as applicable, required by Treasury Regulations section 1.6012-1(b)(ii)(a), provided there is compliance with the filing requirements of Treasury Regulations section 1.6012-1(b)(2)(ii)(a), including the requirement to timely file Form 1040 or Form 1040EZ and attach a properly completed Form 8833.

FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)

Filing Form 8938 does not relieve you of the requirement to file FinCEN Form 114 if otherwise required to file the FBAR. See FinCEN Form 114 and its instructions for FBAR filing requirements. Click here for a chart comparing filing requirements for Form 8938 and FBAR.

Increase of the Minimum Penalty Amount for Certain Late Filed Returns From $135 to $205  

Finally, Section 921 of the Trade Facilitation and Trade Enforcement Act of 2015 increased the minimum late filing penalty for certain returns filed more than 60 days late. In this circumstance, the minimum
penalty has increased from $135 to $205 or the amount of tax owed, whichever is smaller. The increase applies to returns required to be filed after Dec. 31, 2015 and is effective immediately.

 

Smith

R. John Smith, Esq., has been an American Bar Association CLE faculty expert on tax law whose practice for over 30 years focused upon foreign operations tax law compliance matters. He is author of the treatise "Practical Insights on Tax Law,” a tax law technical editor of more than 50 tax law CLE/CPE courses, a tax law global compliance advisor, and a lecturer on tax law throughout the country. He has developed and instructed webinars on a variety of business enterprises, partnerships, limited liability companies, and corporations. He is a member of the U.S. Tax Court Bar and the U.S. Supreme Court Bar. He has recently attended Faculty Ethics Symposia at Yale School of Medicine, Harvard Medical School, Columbia University Medical Center, and Massachusetts Institute of Technology. He is an alumni of Harvard University and New York University School of Law and can be reached at rjohnsmith510@post.harvard.edu

 
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