FBAR vs 8938 & FATCA vs FBAR
FBAR vs 8938
FBAR vs 8938: When it comes to international reporting and offshore disclosure of foreign assets, accounts, investments, and income, the two most important forms for U.S. Persons to be in compliance with are the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN form 114) and FATCA form 8938 (Foreign Account Tax Compliance Act). While these two forms are similar — and may overlap with respect to certain reporting — they are not mutually exclusive from one another.
Depending on the type of offshore assets and accounts — along with the values of the different categories of assets — some taxpayers may have to file one or both forms each year.
With the IRS taking an aggressive stance on matters involving international and offshore reporting compliance, it is important to remain in compliance.
If you are not currently in compliance, you may consider one of the offshore tax amnesty programs to get into compliance.
We will summarize the five (5) key differences between these two forms:
Threshold for FBAR & Form 8938 Reporting
The threshold requirements for reporting these two different forms vary based on a number of different factors.
As to the FBAR specifically, the threshold remains constant. When a U.S. person (including individuals, entities, trusts and/or estates) has an annual aggregate total for all of their foreign accounts (not per account) that exceeds $10,000 USD on any given day of the year — they may to have to report the FBAR.
Conversely, the 8938 the threshold requirements vary depending on whether a person is a U.S. resident or a foreign resident.
In addition, the threshold for reporting the Form 8938 will also vary based on whether the person is filing single/married filing separate (MFS) or married filing jointly (MFJ).
FBAR & Form 8938 Due Date For Reporting
At the current time this article was written, the FBAR is on automatic extension each year for filing.
Technically, the FBAR is due on April 15th. But, the FBAR is an automatic extension until October 15th (October 31st for 2019’s FBAR). By “automatic extension,” it means that the filer does not need to file a separate request for extension in order to extend the FBAR filing due date to October.
On the other hand, the form 8938 is filed at the time a person files their tax return, and is not on automatic extension.
If the person files an extension for filing their tax return, the time to file Form 8938 also goes on extension.
*These rules are subject to change.
Tax Return Filing Requirement (FBAR & 8938)
One of the more confusing aspects of the FBAR and 8938 form is under what circumstances do the forms have to be filed.
For example, the FBAR must be filed when a U.S. person meets the reporting threshold — whether or not they have to file a tax return in that year.
For example, if Scott has $700,000 in foreign accounts but no U.S. tax return filing requirement — he still has to file the FBAR to report the accounts
The form 8938 is different. This form is only filed when a tax return is filed.
Therefore, if Michelle is not required to file a tax return in the current year, she would not have to file form 8938 in the current year either — even if she otherwise met the threshold requirement for filing the Form 8938. Likewise, Michelle is not required to file a tax return solely for the purpose of lodging a Form 8938.
Form 8938 Assets vs FBAR Accounts
While there is much overlap between the two different forms as to what must be included on the form — the reporting requirements are not identical.
Therefore, it is important to note the different accounts and asset types and categories that a person has before submitting the forms and/or duplicating the assets from one form onto the other form — if a person has to file both in the current tax year.
One example is stock certificates.
While stock certificates are required to be filed on form 8938 as an asset, individual stock certificates are not included on the FBAR. Stock accounts on the other hand, would be included on the FBAR — since it is a type of account.
Form 8938 and FBAR Penalties
The penalties for both of these forms vary.
The form 8938 penalties start at $10,000, and based on the continuing failure to file can go up to an additional $50,000.
The FBAR penalties will range extensively based on the number of accounts and whether the person was deemed willful or non-willful.
Many jurisdictions are split as to whether penalties are issued per form or per account, and whether or not there is a $100,000 maximum willful penalty (adjusts for inflation).
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No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
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