The Ins and Outs of Offshore Asset Reporting Explained 2026
The Ins & Outs of Offshore Asset Reporting Explained 2026
Each year, U.S. person taxpayers who have foreign accounts and assets may be required to report information about their foreign accounts to the U.S. government. The IRS publishes various international information reporting forms each year that taxpayers are required to use to report this information annually with their tax return filing. In fact, several of the forms are required even if the taxpayer is not required to file a tax return, such as Form 3520, Form 8621, and the FBAR (while the latter is not technically a tax form but still required to be filed, with penalties enforced by the IRS).
While there are many different categories of accounts and assets that a taxpayer may have to report, let’s look at five (5) common types of foreign accounts and assets that are required to be disclosed to the U.S. government each year.
Foreign Bank Accounts
If a taxpayer has a foreign bank account and they meet the threshold requirements for reporting, then the foreign bank account is reportable.
A few things to keep in mind:
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Even if the account does not generate any interest, it is still reportable.
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It does not matter if the account was opened before or after the taxpayer became a U.S. person; if it was opened during the year in which the taxpayer is reporting, then it is reportable.
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If the account is dormant or has a zero value, it is still reported.
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Overseas Investment Accounts
If the taxpayer has a foreign investment account similar to a U.S. type of investment account, such as Vanguard, Schwab, E*TRADE, etc., then the account is reportable. In general, the taxpayer does not have to parse out each investment within the account for the FBAR, but rather reports the maximum account value with all the investments combined under the account number.
*There is may be additional requirements when taxpayers have certain foreign mutual funds and ETFs in a foreign investment account.
Foreign ETFs and Mutual Funds
If the taxpayer owns foreign ETFs and mutual funds within a single account or multiple accounts, for the FBAR, the total account value is reported, and each fund does not have to be parsed out for the FBAR. But the taxpayer may be required to parse out each fund that is considered a PFIC on their tax return by filing Form 8621. The Form 8621 requirements are onerous because taxpayers have to identify each fund separately, and in any year where there is an excess distribution, the taxpayer has to prepare a detailed calculation — and show their work to the IRS.
Foreign Pension Plans
Foreign pension plans are reportable to the IRS, but making matters (understandably) confusing for taxpayers was that few years back, the IRS published guidance that gave the misimpression that a foreign pension plan is not reportable — because the IRS did not distinguish between U.S. pension plans and foreign pension plans for purposes of the guidance.
If the taxpayer owns a 401K for example, and has foreign investments in that 401K, then generally those are not reportable. However, if the taxpayer owns a foreign pension plan such as an Australian superannuation, a Singaporean CPF, or an Indian EPF, these types of foreign pension plans are reportable.
Foreign Life Insurance Policies
Most foreign life insurance policies are reportable for IRS international information reporting when there is a cash or surrender value to the policy. For example, if the taxpayer owns a foreign life insurance slash investment policy — such as a Tokio Marine policy in which the taxpayer pays a premium and has a surrender or cash value so that if they cancelled the policy early — they would still receive a payout, then the value of that payout is the reportable value. For example, if it is a $2,000,000 policy that currently has a $250,000 surrender value, then for purposes of FBAR and IRS Form 8938, the reportable value is $250,000.
Current Year vs. Prior Year Non-Compliance
Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.