History of FATCA and FinCEN Form 114
FATCA (Foreign Accounts Tax Compliance Act) and FinCEN Form 114 are required forms which were created as a direct result of an initiative by the United States to identify practices of tax evasion and hold the responsible parties accountable.
For more than 5 years, the IRS and Department of Treasury have collected billions of dollars of revenue through the identification and collection of unpaid taxes and assessed penalties for failure to file and failure to report required foreign financial account information. Worldwide US Expats are being affected by these initiatives – not only along the lines of accountability for offshore financial assets, but also because of the global infamy of FATCA. Banks in all parts of the world are turning American clients away to avoid becoming involved in the detailed reporting requirements being requested by the United States.
If you are either a US Expat or a US Citizen living in the United States with foreign financial assets, there is critical information you need about FATCA Form 8938 and FinCEN Form 114. This article is intended to provide you with the basic filing requirements of each of these forms.
FinCEN Form 114
FinCEN Form 114 is required if you have (or had at any time during the calendar year) one or more foreign financial accounts with a total balance of $10K or more. FinCEN Form 114 is filed electronically online.
It’s important to understand that you are required to file FinCEN Form 114 even if you only held one or more qualifying accounts for one day during the year. Another important note is that the $10K balance is an aggregate total of all your foreign bank accounts – not just one or the other. If another individual or entity actually owns a foreign financial account but you are listed as an authorized party or signor on the account, you are required to include the account information on FinCEN Form 114.
When you file FinCEN Form 114, it is sent directly to the US Department of Treasury, and you must file by June 30 of the year following the tax year in which you held the account(s) being reported. You may not request a filing extension, so it’s important to have your foreign banking information gathered well before the deadline. Failure to file a timely report may result in extremely punitive fees.
FATCA Form 8938
Requirements for FATCA Form 8938 are not as straightforward as the requirements to file FinCEN Form 114, and – instead of being filed online with the Department of Treasury, FATCA Form 8938 is sent to the IRS and filed with your US expat tax return.
Foreign financial assets which should be reported on FATCA Form 8938 are not limited to foreign financial accounts held at banks. If you earn income from a foreign financial asset such as foreign partnership interests, pensions, stockholdings or other income-producing assets, you will be required to include them on Form 8938. If your annual income is below the required filing thresholds determined by the IRS and you are not required to file an income tax return, you will not be required to file Form 8938.
If you are required to file a US expat tax return with the IRS and you meet any of the following guidelines, you will be required to file FATCA Form 8938:
- Single Taxpayers or MFS (Married Filing Separately) Living in the United States: Foreign assets with an aggregate value of $50K at the end of the calendar year or $75K at any point during the tax year.
- MFJ (Married Filing Jointly) Living in the United States: Foreign assets with an aggregate value of $100K at the end of the calendar year or $150K at any point during the tax year.
- Single Taxpayers or MFS Living Abroad: Foreign assets with an aggregate value of $200K at the end of the calendar year or a total value of $300K at any point during the tax year.
- MFJ Taxpayers Living Abroad: Foreign assets with an aggregate value of $400K at the end of the calendar year or a total value of $600K at any point during the tax year.
Important Considerations about FATCA Form 8938 and FinCEN Form 114
Even if you aren’t required to file a tax return and are therefore not required to file Form 8938, you may still have to file FinCEN Form 114.
Your income levels and the value of your foreign financial assets will determine whether or not you are required to file FATCA Form 8938 or FinCEN Form 114 – or both. If you need help determining which of these forms you may be required to file, make sure to speak with a qualified US Expat tax consultant.