If you are living abroad and considered to be a U.S. Person by the IRS for tax filing purposes you may have to report your foreign bank accounts (bank accounts not located within the U.S. to the IRS. Today we will discuss the most common forms required by U.S. expats in regards to foreign bank account filing. The FinCen 114 (FBAR), and Form 8938 (Statement of Speceified Foreign Financial Assets).
FinCen 114 or FBAR (Previously known as the TDF 90-22.1)
FBAR Quick Facts
|1||Filing deadline is April 15th with auto extension to October 15th|
|2||Must file if the highest balance of all foreign bank accounts in the year is over $10,000 USD|
|3||Late filing penalties for non-willfull violations not due to reasonable cause not to exceed $12,459 per violation|
|4||Must be filed electronically|
There are certain exceptions to the FBAR reporting requirements including (but not limited to):
- Certain foreign financial accounts jointly owned by spouses
- United States persons included in a consolidated FBAR
- Correspondent/Nostro accounts
- Foreign financial accounts owned by a governmental entity
- Foreign financial accounts owned by an international financial institution
- Owners and beneficiaries of U.S. IRAs
- Participants in and beneficiaries of tax-qualified retirement plans
- Certain individuals with signature authority over, but no financial interest in, a foreign financial account
- Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust)
- Foreign financial accounts maintained on a United States military banking facility.
Taxpayers who have failed to timely file their FBAR forms may be eligible for Streamlined Filing Compliance Procedures. The Offshore Voluntary Disclosure Program (OVDP) was discontinued in September 2018. If due to circumstance surrounding the late filing of the FBAR forms the taxpayer is not eligible for Streamlined Filing, they should follow the Delinquent FBAR submission procedures.
Form 8938 (Statement of Speceified Foreign Financial Assets)
8938 Quick Facts
|1||Part of and filed with Form 1040|
|2||Same deadline as Form 1040 (April 15th), and extended to October 15th if form 4868 is filed.|
|3||If you are required to file but do not, a penalty of a maximum of $10,000 may be assessed.|
8938 Filing Thresholds
|Highest||End of Year|
|Living in U.S.|
|Highest||End of Year|
Exceptions to Reporting
Some exceptions to 8938 reporting include (but are not limited to) the following:
If you report one or more of the following forms that you timely file with the IRS for the same tax year you do not have to report the same asset on Form 8938.
- Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.
- Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
- Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.
- Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations.
Bona fide resident of a U.S. possession.
If you are a bona fide resident of a U.S. possession (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands), do not include the value of the following assets to determine if you satisfy the reporting threshold that applies to you. If you are required to file Form 8938, you do not have to report the following specified foreign financial assets on Form 8938.
- A financial account maintained by a financial institution organized under the laws of the U.S. possession of which you are a bona fide resident.
- A financial account maintained by a branch of a financial institution not organized under the laws of the U.S. possession of which you are a bona fide resident, if the branch is subject to the same tax and information reporting requirements that apply to a financial institution organized under the laws of the U.S. possession of which you are a bona fide resident.
- Stock or securities issued by an entity organized under the laws of the U.S. possession of which you are a bona fide resident.
- An interest in an entity organized under the laws of the U.S. possession of which you are a bona fide resident.
- A financial instrument or contract held for investment, provided each issuer or counterparty that is not a U.S. person is either an entity organized under the laws of the U.S. possession of which you are a bona fide resident or a bona fide resident of the U.S. possession of which you are a bona fide resident.
At Horizon Expat Tax we are happy to provide the following quality services:
- U.S. taxes for taxpayers worldwide
- U.S. Tax services for individuals immigrating to the U.S.
- Tax preparation and advisory for U.S. non-residents with U.S. reporting requirements
- Small business tax compliance, advisory, and bookkeeping services
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Any tax advice herein is based on the facts provided to us and on our interpretation of tax legislation as it reads at the time the advice is provided. Tax law is subject to continual change, at times on a retroactive basis and may result in incremental taxes, interest or penalties. We are not responsible for updating our advice for changes in law or interpretation after the date the advice is provided. Every tax situation is different. We are not responsible for the tax implications to any individual or entity that may act on this advice.