With marriage come an array of benefits and burdens. When individuals file taxes, those who are married may be able to experience the potential benefits of filing joint taxes. These benefits include a reduced filing burden since the taxpayers only have to file a single tax return. In some circumstances, the taxpayers may even benefit from reduced taxes. However, with the benefits of filing a joint tax return come certain responsibilities. Taxpayers must consider how filing joint taxes can impact the steps they need to take to satisfy other obligations. In particular, it is essential for taxpayers to consider whether they must file an FBAR.
The tax attorneys at NewPoint Law Group, LLP can help you and your spouse assess your finances and determines whether one or both of you need to file an FBAR. To schedule a confidential consultation, please call our Roseville tax law office at 800-358-0305 or contact us online.
Who Can File Joint Taxes?
The short answer is that only married couples can file income taxes jointly. Therefore, individuals who are dating or living together but not married are not eligible to file a joint tax return. The key distinction that determines whether you are able to file joint tax returns with your partner is whether your state legally recognizes your marriage. If your state recognizes your marriage and you were married for any portion of the relevant tax year, filing income taxes jointly is an option. For unmarried couples who have joined their households, one spouse may file with “head of household” status to somewhat mitigate the household’s inability to file jointly.
Must Both Spouses File FBAR when a Joint Tax Return Was Filed?
The FBAR obligation is satisfied by filing FinCEN Form 114 through the online Bank Secrecy Act web portal. The obligation exists when the aggregate balance of foreign accounts held by a taxpayer exceeds $10,000 at any point during a tax year. Taxpayers who fail to file FBAR – even accidentally – can be subject to a $10,000 penalty. If the noncompliance appears intentional, even harsher penalties apply.
However, the good news is that it is indeed possible to file a joint FBAR (FinCEN Form 114 – Report of Foreign Bank Accounts) with one’s spouse. One caveat to this general rule is that the accounts must be jointly held by both spouses. If an account is held by one partner but not the other, then each spouse must file their own FBAR.
California’s Community Property Regime Can Impact Whether You “Hold” Foreign Accounts
It is also important to note that California’s community property regime can and will impact the determination of whether foreign financial accounts are jointly held.
Under California’s community property system, the assets and property a person obtained prior to marriage are typically classified as separate property. Separate property is the property that belongs to only one spouse. By contrast, the property that the spouses obtain during the marriage is typically classified as community property. Community property is the property in which each spouse holds a joint and equal share. Community property belongs to both spouses and is held jointly. While these rules can be modified through the agreement of the spouses and are subject to exceptions, these are the general default rules.
Thus, California’s community property rules will impact whether an account is separate property held by one spouse or community property held by both spouses. Generally and in the absence of an agreement to the contrary, spouses that acquired foreign accounts prior to marriage will need to file separate FBARs. However, if your foreign accounts were obtained or open during the course of the marriage, it is far more likely that a joint FBAR filing will be appropriate. Of course, every situation is different and this is a fact-specific determination, so please refrain from filing an FBAR until you have discussed the specifics of your concerns with a tax professional.
Work with California Tax Lawyers to Comply with FBAR
The California tax lawyers of NewPoint Law Group, LLP can address an array of tax concerns. If we do discover problems regarding FBAR or foreign disclosure, we can help you mitigate the potential consequences you can face. To schedule a free and confidential consultation, please call 800-358-0305 or contact us online today.
