If you worked internationally and came back to the United States with money still sitting in a foreign account, you may be carrying a more complicated tax situation than you realize. A recent listener question brought this issue into sharp focus, and it’s worth walking through carefully.
The listener and their spouse spent over a decade working in the UAE before returning to the U.S. in 2019. They have roughly $900,000 in an HSBC account in Dubai, a mix of cash and bond funds, and they’re unsure of their reporting obligations, whether they’re already out of compliance, and what the right path forward looks like.
Here is my honest take.
You Likely Need a Tax Attorney
This is not a situation to navigate on your own, and it is not one where a general CPA is going to be enough. You need someone who specializes in international tax law, specifically with experience in Dubai and U.S. foreign account compliance. Yes, that expertise comes with a cost. But when you have close to a million dollars sitting abroad with years of unreported income, the cost of not getting proper help is much higher.
Two Separate Obligations
This is where a lot of people get tripped up. There are actually two distinct requirements at play here, and most people only think about one.
The first is the income tax obligation. Even though Dubai has no personal income tax, the United States taxes its citizens and residents on worldwide income. Any income you’ve been generating on that cash and those bond funds since returning to the U.S. is taxable here, and it needs to be reported.
The second is the foreign account reporting requirement. At just $10,000 in a foreign account, U.S. residents are required to report that account’s existence. This comes through two main filing requirements: the FBAR (FinCEN 114) and FATCA (Form 8938). These are separate from your tax return, and failing to file them carries its own set of penalties.
In this case, it sounds like both of these have been missed for several years. That is a significant compliance gap.
Willful vs. Non-Willful Non-Compliance
One of the most important things a tax attorney will help you determine is whether your non-compliance was willful or non-willful. The distinction matters enormously when it comes to penalties.
If you genuinely did not know you were required to report the account and the income, and you can demonstrate that, the penalties are generally lower. If the IRS determines that you knew about the requirements and chose not to comply, the penalties become much more severe. The U.S. takes foreign account concealment seriously, and the penalties reflect that.
This is exactly why getting a qualified attorney involved quickly is so important. They can help you understand where you stand and, if needed, pursue a voluntary disclosure program to get into compliance in the most favorable way possible.
Start Moving That Money Home
Beyond getting into compliance, I would strongly encourage looking at repatriating those funds back to the United States. At $900,000, the income you’re earning on the cash and bond funds is almost certainly not worth the ongoing legal and tax complexity of keeping it abroad. Pay what is owed, clean up the situation, and remove the annual compliance burden going forward.
If you do not have a tax attorney in your area who handles international cases, start making calls. A few conversations with local attorneys will almost always lead you to someone who can help with this specific issue.
The sooner you address this, the better your options will be.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on foreign account compliance and repatriating money to the U.S., listen to the full podcast episode here.