[Ed. Note: This guest post is very timely and appears courtesy of our friends at Greenback Expat Tax Services. Their contact info appears at the end of the post.]
FBAR vs FATCA: A Comparison of Filing Requirements
Expats are being bombarded with information about FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) and the importance of filing the appropriate forms if required. But many people may not actually know the difference between these and the specific filing requirements for each. This article will give an overview of FBAR and FATCA and help you determine exactly what you may need to file this year.
IRS Crackdown on Tax Evasion
To give a bit of history here, both FBAR and FATCA are part of the US crackdown on those taxpayers hiding assets in overseas accounts in an attempt to avoid US taxes. The IRS has collected billions of dollars in unpaid taxes as a result of their efforts and the push to collect more will likely continue for some time to come. FATCA has become worldwide news, as not only are individuals required to report their foreign assets, foreign financial institutions are now required to report on the accounts of their American clients. There have been widespread reports of Americans being turned down for bank accounts or having their accounts closed simply because the banks don’t want the hassle of the additional reporting requirements.
FBAR is a report of foreign bank accounts and its purpose is to collect information on bank account balances of US taxpayers. If you have had $10,000 or more in a foreign bank account at any point during the year (even one day) you must file FBAR. This is an aggregate balance—so if you had a total of $10,000 or more in several bank accounts, you must file. Also, if you have signing authority over such an account, FBAR must be filed.
The FBAR is not sent to the IRS—it is sent electronically to the US Treasury Department via FinCEN Form 114. The deadline for filing is June 30 and there are no extensions. Even if you requested an extension on your US tax return, you must file FBAR on time. Penalties for failure to file can be steep so it is important to meet that deadline if you are required to file.
FATCA Form 8938 is filed with the IRS, along with your US tax return—if you receive an extension on your tax return, you receive an extension on Form 8938 as well. The reporting requirements from FATCA are very different from FBAR. You must file Form 8938 if you have specified foreign financial assets that meet or exceed certain thresholds. Specified foreign financial assets include things such as:
- Foreign pensions
- Foreign stockholdings
- Foreign partnership interests
- Foreign financial accounts
The reporting thresholds are different for taxpayers residing in the US than they are for those living abroad.
Thresholds for those residing in US:
- Single filer: Total value of assets was $50,000 or more at the end of the tax year, or $75,000 at any point during the year
- Married filer: Total value of assets was $100,000 or more at the end of the tax year, or $150,000 at any point during the year
Thresholds for those residing outside the US:
- Single filer: Total value of assets was $200,000 or more at the end of the tax year, or $300,000 at any point during the year
- Married filer: Total value of assets was $400,000 or more at the end of the tax year, or $600,000 at any point during the year
One note: if you aren’t required to file a tax return in any given year, you are not required to file Form 8938, regardless of the value of your specified foreign assets.
If you determine that you do not need to file Form 8938, it does not mean that you don’t need to file FBAR (and vice versa). It is important to look at your assets and account balances carefully to determine what you may be required to file: both, one or the other, or neither!
Greenback has created this detailed chart with a side-by-side comparison to help you distinguish the differences between FBAR and Form 8938 filing requirements.
This post was written by David McKeegan, co-founder of Greenback Expat Tax Services. Greenback specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and IRS Enrolled Agents who have extensive experience in the field of expat tax preparation. For more information, please visit greenbacktaxservices.com.
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