Reporting Foreign Accounts: Requirements, Thresholds, and Penalties

    The article discusses the requirements for reporting foreign accounts, including the filing of Form 8938 (FATCA) and FBAR (FinCEN Form 114). It outlines who must file these forms, the reporting thresholds, due dates, and additional considerations such as penalties and records retention. It also emphasizes the importance of consulting a tax professional for compliance with these requirements.

      Requirements for Reporting Foreign Accounts
      Form 8938 (FATCA)
      • Who must file: Specified individuals, which include U.S. citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold.
      • Reporting threshold:
        • Single or filing separately from your spouse: Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year.
        • Married filing jointly: Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year.
        • Higher thresholds apply to U.S. citizens living abroad.
      • Due Date: Form 8938 is attached to your annual return and due on the date of that return, including any extensions.
      FBAR (FinCEN Form 114)
      • Who must file: U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold.
      • Reporting threshold: The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
      • Due Date: FBAR is due April 15, with an automatic extension to October 15.
      • How to file: FBARs are not filed with the federal tax return. They must be filed electronically through the BSA E-Filing System or with the help of a tax professional who can file it on your behalf.
      Additional Considerations
      • Penalties: Failure to file these forms can result in severe penalties, including monetary fines and potential criminal charges.
      • Records Retention: Keep records for at least five years from the due date of the FBAR.
      • Joint Accounts: If you hold a foreign account jointly with someone else, you must report the entire value of the account on your FBAR and Form 8938 if required.
      • Signature Authority: You may also need to file an FBAR if you have signature authority over a foreign financial account, even if you do not have any financial interest in the account.
      • Consult a Professional: Due to the complexity of these requirements, it is advisable to consult with a tax professional who is experienced in international tax matters to ensure compliance.