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Comparison of Forms 8938 and FinCEN 114 (FBAR)

 


IJ Zemelman  Dec-05-2014

 

If you’re a U.S. taxpayer and you have assets and accounts in a foreign country, you may need to submit Form 8938 and/or FinCEN Form 114 (Report of Foreign Bank and Financial Accounts) to the IRS. This is so the IRS can keep track of your foreign holdings and is part of their campaign to reduce international tax evasion. To help you stay compliant with this reporting, we’ve put together a complete comparison of all the requirements for these two forms.

 

 

Form 8938, Statement of Specified Foreign Financial Assets

FinCEN Form 114, Report of Foreign Bank and Financial Accounts

Who needs to file

Individuals who are U.S. citizens, resident aliens, and certain non-resident aliens who have foreign financial assets and meet the Form 8938 reporting thresholds.

U.S. persons with an interest in foreign financial accounts that meet the FBAR reporting thresholds. This includes U.S. citizens, resident aliens, estates, trusts, and domestic entities.

Does it Include U.S. Territories

No

Yes. U.S. resident aliens of territories and territorial entities are subject to FBAR reporting

Reporting Threshold (Minimum Value of Assets to Require Reporting)

Either $50,000 at the end of the tax year or $75,000 at any point during the year. Married taxpayers filing jointly and taxpayers living abroad have higher limits.

$10,000 at any point during the year

When Do You Have an Interest in an Asset or Account that Requires Reporting

If any income, gains, losses, deductions, credits, gross proceeds, or distributions from the holding or disposing the asset would be relevant to your income tax return, you have an interest that requires reporting.

The IRS considers a couple factors. First, if you are the owner of the asset, the holder of the legal title, or the owner of record is your agent, you are considered to have a financial interest in the asset.

If you have control of the disposition of assets through your communication with the financial institution holding the account, you have signature authority over the asset. Both interests need to be reported. 

What Needs to be Reported

You need to report the maximum value of foreign financial assets, which includes financial accounts as well as non-account foreign investment assets.

You need to report the maximum value of all financial accounts at financial institutions located in a foreign country.

How Do You Determine the Maximum Value of Accounts and Assets for Reporting?

By calculating the fair market value of the assets and accounts in U.S. dollars. Use Form 8938 instructions to help with this calculation. You should convert the value of the accounts into U.S. dollars using the taxable year end exchange rate so you can report in U.S. dollars

Use your periodic account statements to find the maximum value of each account during the taxable year.

Convert the maximum value to U.S. dollars using the calendar year exchange rate so you can report the value of all accounts in U.S. dollars.

When is the Form Due?

Form 8938 is due by the same due date as your income tax return. If you get an extension for your income tax return, the extension applies to Form 8938 as well.

All FBAR Forms must be received by the IRS by April 15th.  As of 2016, there is an extension available until Oct 15. 

Where Do You File the Form?

You should file Form 8938 along with your income tax return according to the instructions for filing your income tax return; there is no special filing for Form 8938.

You need to file your FBAR electronically through FinCEN’s BSA E-Filing System. You cannot file your FBAR along with your income tax return.

Penalties for Not Filing

Failing to file can lead to a penalty of up to $10,000. After the IRS gives you notice of the initial failure to file, every 30 days you go without filing can lead to an additional $10,000 penalty up to a maximum total penalty of $60,000 for not reporting your foreign assets. Criminal penalties could also apply on top of the fine.

If your failure to disclose was non-willful, you could face a penalty up to $10,000. If the IRS deems your failure to disclose was willful, you could face a penalty of the greater of either $100,000 or 50 percent of your account balances. Criminal penalties could also apply on top of the fines.

 

Types of Foreign Assets/Accounts and Whether They Need to Be Reported

 

Form 8938, Statement of Specified Foreign Financial Assets

FinCEN Form 114, Report of Foreign Bank and Financial Accounts

Financial accounts, both deposit and custodial, at foreign financial institutions

Yes

Yes

Financial accounts at foreign branches of U.S. financial institutions

No

Yes

Financial accounts at U.S. branches of foreign financial institutions

No

No

Foreign financial with which you only have a signature authority

No, unless you also have an interest in the account as explained above.

Yes, subject to exceptions listed in the FBAR instructions

Foreign stocks and securities in an account at a foreign financial institution

You need to report the account itself but not the individual holdings of stocks and securities in the account.

You need to report the account itself but not the individual holdings of stocks and securities in the account.

Foreign stocks and securities not held in an account at a foreign financial institution

Yes

No

Foreign partnership interests

Yes

No

Indirect interest in foreign assets, like if you have ownership through an entity

No

Yes, if you have sufficient ownership or beneficial interest in the entity, meaning you own more than 50 percent of the entity.

Foreign mutual funds

Yes

Yes

Domestic mutual funds that invest in foreign stocks or securities

No

No

Foreign accounts and foreign non-account investment assets held in a trust that you are the grantor of

Yes for both the account and non-account assets.

Yes but only for the accounts

Foreign life insurance or annuity contracts with cash value

Yes

Yes

Foreign hedge funds and private equity funds

Yes

No

Foreign real estate held directly

No

No

Foreign real estate held through a foreign entity

No but you need to report the value of the foreign entity itself

No

Foreign currency held directly

No

No

Precious metals held directly

No

No

Personal property like antiques, art, cars, etc held directly

No

No

Social Security type programs from a foreign government

No

No

 

 

Zemelman

I.J. Zemelman, EA is the founder of Taxes for Expats
She may be reached at: +1-646-397-2887
Email: questions@taxesforexpats.com
Web site: www.taxesforexpats.com