FATCA Reporting

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.

FATCA (Foreign Account Tax Compliance Act) Form 8938 must be completed by US expats residing outside the US if specified foreign assets exceed the following thresholds: Single filing:

• $200,000 on the last day of the year
• Or $300,000 at any point during the year

Married filing jointly:

• $400,000 on the last day of the year
• Or $600,000 at any point during the year

Specified foreign assets include (but are not limited to):

• Any financial account maintained by a foreign financial institution
• Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely:
• Stock or securities issued by someone other than a US person
• Any interest in a foreign entity
• Any financial instrument or contract that has as an issuer or counter-party that is other than a US person

Specified foreign assets would include your foreign bank accounts, but not assets such as your home. The fee to file Form 8938 includes reporting of up to 5 accounts. If there are more than 5 accounts to report, there is an additional fee of $50 for each additional 5 account block.

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 trigger the requirement filing as single (or $400,000 if married filing jointly). 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 $100 per year, and this covers reporting up to five accounts.

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.

FATCA 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).