How much do I need to have overseas to worry about filing under FATCA?
Having foreign accounts over a certain threshold often necessitates additional form filing. Under FATCA regulations, if an individual has more than $50K in a foreign account, they must file Form 8938. Fortunately though, these thresholds are much higher for Americans living abroad (roughly $200K is needed to file). As such, if you do not have more than $200K in foreign accounts, FATCA is unlikely to impact you.
One other form you should know about is the FBAR. The FBAR is needed if you have more than $10K in foreign accounts. If this is the case, you would need to file the last 6 years to be considered caught up. We can file the FBAR for as little as $95 per year, and this covers reporting of up to five accounts.
If my income is below the US tax filing requirement, do I still need to file FBAR or FATCA?
Unfortunately, even if you are making less income than the filing threshold (roughly $10,300 for a single individual), you must still file an FBAR if you have had more than $10,000 in your foreign accounts at any point during the year. Remember, this is an aggregate amount for all your foreign accounts.
While it’s not specifically required, we’d also recommend reporting for FATCA on a Federal return if your assets meet the filing threshold. For single filers, if you have $200,000 or more in specified foreign assets on the last day of the year or more than $300,000 at any point during the year, you must file. If you are filing married jointly, the threshold rises to $400,000 at the end of the year and $600,000 at any point during the year. Filing FATCA will eliminate any negative consequences that could potentially arise from not reporting.
What is FATCA (Foreign Account Tax Compliance Act) and how does it affect me as an US expat?
The Foreign Account Tax Compliance Act is designed to improve tax compliance for foreign assets in offshore accounts. Under FATCA, US taxpayers with specified foreign financial assets (such as bank accounts, foreign stock, partnership interests, foreign mutual funds, even foreign life insurance) that exceed certain thresholds must report those assets to the IRS (via Form 8938).
It is also impacting US expats and the international banks and fund managers who have US citizen clients. Effectively, foreign financial institutions are required to report any of their clients who are US citizens to the IRS. If they fail or refuse to do so, they will be counted as “non-participating” and liable for a 30% withholding tax on all American assets; given that the American equity and bond market is the largest in the world, they feel obligated to register.
For those living abroad, FATCA affects you if you have account values of more than $200,000 on the last day of the tax year or $300,000 as a peak value throughout the year for single filers (this amount doubles for people who are married filing jointly).
What is Form 8938?
Form 8938 is the report required under the Foreign Account Tax Compliance Act (FATCA). This requires individuals or businesses with foreign accounts meeting certain reporting thresholds to file Form 8938 with the IRS.
Form 8938 is part of your US federal tax return, and as such, will have the same filing deadline, including extensions. For more information on Form 8938 and FATCA, please check out our in-depth article about Form 8938.
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