The FBAR (Report of Foreign Bank and Financial Accounts) and Form 8938 (Statement of Specified Foreign Financial Assets) are both reporting requirements for U.S. taxpayers with foreign financial accounts. While there may be some overlap in the information reported on these forms, they serve different purposes and have different filing thresholds.
1. What is the purpose of filing FBARs and Form 8938?
The primary purpose of FBAR is to combat tax evasion and money laundering by U.S. persons who have financial interests in or signature authority over financial accounts located outside the United States.
Form 8938 is part of the Foreign Account Tax Compliance Act (FATCA) and is designed to enhance tax compliance by requiring taxpayers to report specified foreign financial assets along with their annual income tax return.
2. Who needs to file FBARs and Form 8938?
FBAR (FinCEN Form 114): U.S. persons who meet the following criteria may be required to file an FBAR:
Ownership or Signature Authority: If you have a financial interest in or signature authority over one or more financial accounts outside the United States, and the aggregate value of these accounts exceeds $10,000 at any time during the calendar year, you must file an FBAR.
U.S. Persons: U.S. persons include U.S. citizens, U.S. residents, and entities (including corporations, partnerships, and trusts) created or organized under U.S. laws.
Foreign Financial Accounts: Financial accounts subject to FBAR reporting include bank accounts, securities accounts, and other types of financial accounts held at foreign financial institutions.
Form 8938 (Statement of Specified Foreign Financial Assets): U.S. persons may be required to file Form 8938 if they meet the following criteria:
Filing Status and Thresholds: The filing thresholds for Form 8938 depend on filing status and whether the taxpayer resides in the United States or abroad. For example, the reporting threshold is higher for individuals living abroad.
Specified Foreign Financial Assets: Form 8938 covers a broader range of assets, including financial accounts, certain foreign securities, interests in foreign entities, and financial instruments with foreign counterparties.
U.S. Persons: Similar to FBAR, U.S. persons, including U.S. citizens, U.S. residents, and certain nonresident aliens, may have a filing requirement.
3. What are the filing thresholds and timelines for FBARs and Form 8938?
FBAR (FinCEN Form 114):
Filing Threshold: If the aggregate value of your foreign financial accounts exceeds $10,000 at any time during the calendar year, you are required to file an FBAR.
Filing Deadline: The FBAR filing deadline is April 15th, with an automatic extension available until October 15th.
Form 8938 (Statement of Specified Foreign Financial Assets):
Filing Threshold:
| Total value of Asset should exceed either of the below | ||
| Filing Status | At any time of the year | Last day of the Year |
| Single/Married Filing Separate (Living in the US) | $75,000.00 | $50,000.00 |
| Single/Married Filing Separate (Living Abroad) | $150,000.00 | $100,000.00 |
| Married Filing Joint (Living in the US) | $200,000.00 | $300,000.00 |
| Married Filing Joint (Living Abroad) | $400,000.00 | $600,000.00 |
Filing Deadline: The 8938 filing deadline is April 15th, with an automatic extension available until October 15th.
4. Can a single FBAR be filed jointly when filing Married Filing Joint tax return and how to report jointly owned accounts?
Yes, when married individuals file a joint income tax return, they can file a single FBAR (FinCEN Form 114) to report jointly owned foreign financial accounts. Joint filers can aggregate the values of their respective foreign financial accounts on a single FBAR. Here are some key points regarding filing a joint FBAR:
Joint FBAR Filing:
Married individuals who file a joint income tax return can choose to file a single FBAR that includes the financial accounts owned by both spouses.
Aggregating Account Values:
When filing jointly, the spouses should aggregate the values of their respective foreign financial accounts to determine whether the aggregate value exceeds the $10,000 reporting threshold.
Reporting for Each Account Holder:
For joint accounts, each spouse is considered an account holder for FBAR purposes. Therefore, if either spouse has a financial interest in or signature authority over an account, the account should be reported on the joint FBAR.
Completing FBAR Form:
When completing the FBAR form, the joint filers should provide information about each jointly owned account, including the maximum value of the account during the calendar year.
Designation of One Spouse as Filer:
While both spouses are considered account holders for joint accounts, the FBAR form allows for the designation of one spouse as the “filing spouse.” This designation is made on the FBAR form itself.
5. What are the penalties for non-compliance with FBAR and Form 8938 reporting requirements?
Non-compliance with FBAR (FinCEN Form 114) and Form 8938 (Statement of Specified Foreign Financial Assets) reporting requirements can lead to significant penalties. The penalties vary based on factors such as whether the failure to report is deemed willful or non-willful, the amount of unreported assets, and the length of the non-compliance. Here are the potential penalties for each:
FBAR (FinCEN Form 114):
Non-Wilful Violations
- Up to $10,000 per violation.
- If the violation is due to a reasonable cause and not willful neglect, penalties may not be imposed.
Wilful Violations
- The greater of $100,000 or 50% of the amount in the account at the time of the violation, for each violation.
- Criminal penalties may also apply, including fines and imprisonment.
Form 8938 (Statement of Specified Foreign Financial Assets):
Non-Wilful Violations
- Up to $10,000 for failure to disclose specified foreign financial assets.
Wilful Violations
- The greater of $100,000 or 50% of the value of the specified foreign financial assets, for each violation.
- Criminal penalties may also apply, including fines and imprisonment.
6. How can USA Tax Gurus help me file FBARs and Form 8938?
USA Tax Gurus can assist you in filing FBARs (Report of Foreign Bank and Financial Accounts) and Form 8938 (Statement of Specified Foreign Financial Assets). Our team of tax experts is well-versed in international tax matters and can guide you through the process to ensure compliance with the IRS requirements.
Here’s how USA Tax Gurus can help you with FBARs and Form 8938:
FBAR Filing: We will help you gather the necessary information about your foreign bank and financial accounts. Our experts will assist you in completing the FinCEN Report 114 accurately and filing it electronically through the BSA E-File System. We can also provide guidance on any exemptions or special circumstances that may apply to your situation.
Form 8938 Filing: Our team will guide you in determining whether you meet the threshold for filing Form 8938. If your specified foreign financial assets exceed the reporting threshold, we will assist you in completing the form and attaching it to your annual tax return. We will ensure that all the required information is included and that you comply with the IRS guidelines.
By choosing USA Tax Gurus, you can have peace of mind knowing that your FBARs and Form 8938 will be filed accurately and on time. Our expertise in international tax matters will help you navigate through the complexities of these reporting requirements.