If you have a foreign bank account(s), it is likely you’ll have FBAR and Form 8938 (Statement of Specified Foreign Financial Assets) filing requirement. Below are answers to a few basic questions related to those forms.

  1. What is FBAR and 8938?

FBAR: The FBAR (Foreign Bank Account Reporting) formerly called the Report of Foreign Bank and Financial Accounts which is also known as FinCEN Form 114. If the total value of all your foreign financial accounts meets or exceeds the appropriate reporting threshold at any time of the year, you are required to file a FBAR.

8938: Form 8938 is used to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest meets or exceeds the appropriate reporting threshold at any time of the year.

  1. Who must file?

FBAR: U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold.

8938: U.S citizens, resident aliens, certain non-resident aliens, certain domestic corporations, partnerships, and trusts that have an interest in specified foreign financial assets and meet the reporting threshold.

  1. Does the United States include U.S. territories?

FBAR: Yes, resident aliens of U.S. territories and the U.S. territory entities are subject to FBAR reporting if they meet the reporting threshold criteria.

Thus, financial accounts in U.S. territories and possessions (Commonwealth Northern Mariana Islands, District of Columbia, American Samoa, Guam, Commonwealth of Puerto Rico, United States Virgin Islands, Trust Territories of the Pacific Islands) are considered foreign.

8938: No, you do not include the value of financial assets of a U.S. possession (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands) if you’re a bona fide resident there.

  1. When Due?

FBAR: The due date for filing is normally April 15, however, a 6-month extension is available.

8938: Form 8938 is attached to your annual tax return and due on the date of that tax return, including any applicable extensions.

  1. What are the FBAR vs 8938 thresholds?

FBAR: Aggregate value of financial accounts exceeds $10,000 at any time during the calendar year. This is a cumulative balance, meaning if you have 2 accounts with a combined account balance greater than $10,000 at any one time, both accounts need to be reported.

8938:

Specified individuals living in the US:

Unmarried individual (or married filing separately): Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year.

Specified individuals living outside the US:

Unmarried individual (or married filing separately): Total value of assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.

Married individual filing jointly: Total value of assets was more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the year.

Married individual filing jointly: Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year.

  1. What types of accounts are reported on FBAR vs Form 8938?

Maximum value of financial accounts maintained by a financial institution physically located in a foreign country for both FBAR and 8938.

FBAR:

* All bank accounts held in foreign financial institutions (Both held separately and jointly)

* All foreign financial investment accounts

* Foreign life insurance or annuity contract with a cash surrender value

* All foreign accounts that you have signature authority but have no financial interest

* Foreign retirement accounts including employer-provided foreign pension plans (such as MPF in Hong Kong).

8938:

* All bank accounts held in foreign financial institutions (Both held separately and jointly)

* All foreign financial investment accounts

* Foreign life insurance or annuity contract with a cash surrender value

* Foreign retirement accounts including employer-provided foreign pension plans (such as MPF in Hong Kong).

*A partnership interest in a foreign partnership;

*An interest in a foreign estate;

  1. What is the difference between FBAR and 8938 in terms of filing?

One main difference with the 8938 vs. FBAR, is that Form 8938 is only filed when you meet the threshold for filing AND must file an income tax return. If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold.

  1. Can file jointly? FBAR vs 8938

FBAR: Yes. However, all the financial accounts that the non-filing spouse is required to report should be jointly owned with the filing spouse (Non-filing spouse cannot have separate foreign financial accounts) and only on a timely-filed FBAR. If this is not met, each spouse needs to file.

8938: Yes, if you and your spouse file a joint income tax return.

  1. Penalties for NOT filing FBAR vs 8938

FBAR: Civil monetary penalties are adjusted annually for inflation. For civil penalty assessment prior to Aug 1, 2016, if non-willful, up to $10,000; if willful, up to the greater of $100,000 or 50 percent of account balances; criminal penalties may also apply.

8938: Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply.

 

Disclaimer: This information has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors or consult us regarding your own personal tax situation as this article was intended to be general in nature.