When it comes to your US expatriate taxes, understanding the intricacies can be complex, and don’t forget the fact you may need to report foreign financial accounts as well! That’s why we’re answering four important questions you should know when it comes to reporting your overseas financial accounts – read on for details.
1) What are the differences between FBAR and FATCA Form 8938?
While both forms are in use for reporting foreign financial accounts on your US expatriate taxes, there are quite a few differences between the two.
- Form 8938 is filed with your US Tax Return and submitted to the IRS, while FBAR is filed with the US Treasury Department.
- The filing threshold for Form 8938 is much higher than FBAR. It starts at $200,000 for US expats and goes up to $600,000, depending on your filing status. FBAR, on the other hand, has a mere $10,000 filing threshold.
- One similarity that is new in 2017: both forms will have the same due date for the first time. This means June 15th for US expats living abroad (as you receive an automatic extension from the April 18th deadline). If you file for a further extension on your US expatriate taxes, this applies to Form 8938 as well. For FBAR, if you don’t file by the June 15th expat deadline, you’ll automatically receive an extension until the October 16th. Read more about the FBAR deadline changes here.
2) How will I know if I need to file an FBAR?
This is fairly straightforward, as essentially, anyone with $10,000 or more in a foreign bank or financial account at any point during the calendar year must file an FBAR. This applies to US citizens and foreign nationals of all ages. If your account(s) hit $10,000 for even just a day, you will need to file an FBAR. Note that cumulative balances are also counted, so if you have $10,000 total but spread across multiple accounts, you must file.
3) How will I know if I need to file Form 8938?
US taxpayers living abroad must file Form 8938 if they are required to file a US tax return for the year (use this tool to see if you must file) and if the value of their aggregate foreign financial assets meets the following thresholds:
- Single or Married Filing Separately: The total value of your foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any point during the year.
- Married Filing Jointly: The total value of your foreign assets owned by you and your spouse is more than $400,000 on the last day of the tax year or more than $600,000 at any point during the year.
The types of foreign assets you must report include: bank accounts, brokerage accounts, stock or securities of foreign issuers, foreign financial instruments, foreign-issued life insurance, annuity contracts with cash value and shares in foreign hedge funds and private equity funds. You can learn more about filing Form 8938 in this article.
4) What if I haven’t filed FBARs in the past and need to get caught up?
Fortunately, the IRS has options for individuals who are behind on filing US expatriate taxes or FBARs, including two amnesty programs designed to help you get back on track.
The Offshore Voluntary Disclosure Program (OVDP) is for those who knew they needed to file but failed to do so. While it still leads to heavy financial penalties, using the OVDP to get caught up eliminates the risk of criminal penalties.
For those whose failure to file FBAR was non-willful, the Streamlined Filing Procedures is a great method for getting caught up. This allows you to become compliant with the IRS without incurring large penalties and interest. You must file the past three years of late tax returns and up to six FBARs in order to get caught up this way. To learn more about getting caught up on late US expatriate taxes, download our guide to US taxes for tips and important things to know.
Have More Questions About Foreign Financial Account Reporting?
Our team of dedicated CPAs and IRS Enrolled Agents are here to help by providing the expat tax advice and preparation you need in order to stay compliant with the IRS. Contact us today to have your expat tax questions answered.