Both the Form 8938 and FBAR forms require U.S. Persons to report Foreign Accounts (accounts outside of the United States) to the IRS. The FBAR is the Report of Foreign Bank and Financial Account Form. It requires the reporting of foreign banks and financial accounts and also includes foreign life insurance, pension, and mutual or investment funds, and accounts the U.S. person has signature authority over.
The 8938 is the Reporting of Specified Foreign Financial Assets form. It requires the reporting of specified foreign financial assets, which has a larger scope than just foreign bank and financial accounts.
FBAR (FinCEN 114)
If a U.S. Person’s “annual aggregate total of foreign accounts exceeds more than $10,000 on any day of the year” whether or not the taxpayer is married and filing jointly or filing separate/single, they are required to report those accounts annually on an FBAR.
It does not matter if the person owns the money, is a joint account holder with a non-US person, or merely has signature authority over the account – they are still required to report it on the FBAR.
The FBAR reports on a calendar year basis, even if the taxpayer is a fiscal year taxpayer. This form is not filed with a tax return but is a separate form filed directly with FinCEN (Financial Crimes Enforcement Network) which is a bureau of the Treasury Department.
Unlike the FBAR, which has one threshold for reporting, there are several and much higher reporting thresholds for Form 8938. Form 8938 has different threshold requirements that vary depending on the Taxpayer’s filing status and based on U.S. Residency vs non-U.S. residency.
Form 8938 is an IRS form and filed directly with a tax return to the IRS and is only required when the taxpayer must file a tax return. Therefore, if the taxpayer does not have to file a tax return in that year, then form 8938 will not be due — even if the person otherwise meets the threshold for filing the form.
2021 Filing Deadlines
The FBAR is due April 15, but is on automatic extension through October 15. You don’t need to request an extension to file the FBAR. The Form 8938 Due Date is the date your tax return is due to be filed including extensions using Form 4868.
The penalties for not filing can be steep! The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
It is important to know that the Form 8938 is not the same as the FBAR. Some individuals may have to file both the Form 8938 and FBAR, some are only required to file one of the forms, and some taxpayers have no FBAR or Form 8938 requirements. While many of the requirements of these forms overlap — there are key distinctions between the different forms.
If you have questions or need the assistance of an expert in international tax, our accountants are pleased to be a resource to you. Please contact us with any questions!
This article was written by Karina Ragan, CPA in our Great Falls office location.