FBAR Filing: When and How to File Online – FinCEN Form 114 Reporting Requirements

Simon Misiewicz

Expat & Property Tax Specialist

5th March 2022

What are the basics of Form 8938 vs FBAR (Fincen) reporting threshold filing requirements? The when and the how.

In recent years, the IRS has stepped up efforts to track down delinquent taxpayers and enforce the payment of overdue taxes. American ex-pats have come under increasing scrutiny. Be sure to learn and understand the FBAR filing instructions as they are needed yearly. You will need to know what and when to file an FBAR Fincen form 114).

One of the main initiatives introduced was the Foreign Account Tax Compliance Act (FATCA) filing & reporting requirements.

FATCA is part of the Hiring Incentives to Restore Employment (HIRE) Act, designed to enforce higher tax compliance among US taxpayers with foreign accounts and assets.

FATCA created Form 8938 in the 1040, an additional foreign account reporting requirement over and above FBAR that must be filed with the US Treasury annually.

If a US taxpayer has more than a certain amount of foreign assets, Form 8938 is included in their annual Form 1040 filing.

It requires an expanded list of foreign assets not covered by FBAR.

Our UK and US tax specialists team recommend that every ex-pat be aware of FATCA and how it could affect their foreign investments and tax liabilities.

Called a Statement of Specified Foreign Financial Assets, Form 8938 is used by expats to tell the IRS about financial assets held abroad.

When living and working abroad, it is common for Americans to gain different foreign financial assets, such as a foreign pension plan or shares in a foreign company.

As a US taxpayer, you must report those foreign assets in your annual taxes and filing Form 8938 is a common way to do this.

The main points to remember about filing Form 8938 are:

– Not every US ex-pat needs to fill one out
– There’s a hefty fine for not filing Form 8938 (up to $50,000)
– Review the different requirements between Form 8938 and FBAR

An FBAR filing requirement is annual if you are within the reporting & filing threshold.

To complete an FBAR form (see FBAR filing instructions), you will need your name, Social Security Number (SSN or ITIN), address, details of all joint account owners, foreign bank names and addresses and the type of accounts held.

We recommend that you review what the IRS says is required for US taxpayers to do when filing Form 8938 and the rules around FBAR reporting and filing.

How much taxes will need to be paid to the Internal Revenue Service (IRS)? Be sure to use the IRS online tax estimates and online calculator.

Filing requirements of IRS Form 8938 Vs an FBAR reporting thresholds instructions for American expats living abroad

IRS Form 8938FBAR of reporting and filing requirements threshold is essential for American expats living abroad with foreign investments to understand. This page will discuss the reporting and how to file an FBAR if required within the reporting instructions.

Form 8938 is used to report specified foreign financial assets if the total value of all specified foreign financial assets is more than the allowed reporting and filing threshold. This reporting and thresholds are specified within the 1040 Internal Revenue Service (IRS) tax filing.

An FBAR stands for Foreign Bank Account Report and is also known as FinCEN Form 114. If you are within the reporting threshold, it must be submitted annually.

FBAR exists to combat tax evasion, mainly reporting money and assets held in foreign banks. FBAR must be filed online at the Financial Crimes Enforcement Network (FinCEN).

FBAR dates back to 1970 when it was created as part of the Bank Secrecy Act.

It is not filed with a federal income tax return. An FBAR filing requirement thresholds apply whenever a US person has a financial interest in or signature authority over a foreign financial account valued over $10,000 at any time during the calendar year.

Form 8938 is only filed when a person meets the threshold for filing and has to file a US tax return.

If a person does not have to file a tax return, then Form 8938 is not required in that current year. American expats need to know what to file and when to file each form to report foreign assets over $10,000.

Do you need to file a FBAR/Fincen Report to meet your compliance obligations?

Certain American (US) expat taxpayers holding specified foreign financial assets with an aggregate value over $50,000 (threshold) need to report information about those assets on Form 8938. We wish to highlight the key differences between form 8938 vs FBAR.

This must be attached to the annual 1040 US income tax return.

Since December 2015, certain domestic corporations, partnerships, and trusts formed to hold (directly or indirectly) specified foreign assets must file Form 8938.

Since 1970, the Bank Secrecy Act (BSA) has required US persons to file an FBAR if they have a financial interest in bank accounts, brokerage accounts and mutual funds in a foreign country.

FBAR reporting also applies if the aggregate value of all foreign financial accounts exceeds $10,000 owned by American expats living abroad. Make sure you understand the requirements and instructions to meet your compliance responsibilities.

When & Who needs to file Form 8938 and when is it to be filed

If you’re a US taxpayer who lives outside of the US and holds a total combined value of foreign assets worth more than $300,000 at any time during the year (or $200,000 on the last day of the year, known as the reporting and filing threshold), you need to report it on Form 8938 to be compliant. This is typical of our American clients that invest in property and live in the United Kingdom (UK).

If you live outside of the US and have qualifying assets, including any bank, investment or retirement accounts maintained outside of the US, it is essential to know when the tax year starts and stops.

You must meet your FBAR filing obligations to avoid stiff penalties.

What is the difference between Form 8938 and FBAR Fincen filing?

There are differences between Form 8938 and FBAR thresholding reporting and filing, so it is vital to understand them for all American exports living abroad.

Form 8938 is filed with the IRS, but you file FBAR with FinCEN, the US Treasury Department’s Financial Crimes and Enforcement Network.

Form 8938 requires American expats to report the maximum value of specified foreign financial assets, including foreign financial accounts.

FBAR form threshold requires you to report the maximum value in foreign financial accounts maintained by a foreign institution physically located in a foreign country.

Form 8938 is attached to your annual income tax return and is due by the ex-pat tax filing deadline. FBAR must be received by April 15th with a six-month automatic extension available to October 15th.

What needs to be reported on Form 8938?

Financial accounts held in a foreign financial institution must be reported on Form 8938.

Foreign stock held in a foreign brokerage account must be reported, but the stock within the account does not need to be reported separately.

Foreign stock held outside a foreign brokerage account, foreign partnership interests, foreign domestic funds, foreign-issued life insurance, foreign hedge and private equity funds must be reported under Form 8938 to the IRS.

What are the penalties for failing to file Form 8938?

Failure to file Form 8938 can result in a $10,000 fine with additional penalties of up to $50,000 for continued failure after IRS notification.

Underpayment of tax attributable to non-disclosed foreign financial assets will be subject to an additional penalty of 40%.

What are the penalties for failing to file under FBAR threshold?

There are severe consequences if you do not report your foreign accounts as an American expat living abroad.

If the IRS decides you have committed a willful violation, the consequence can include a penalty of $100,000 or 50% of the account value, whichever is higher.

If you don’t disclose offshore accounts, you could be caught through an IRS audit, freezing all foreign accounts.

The IRS can also impose penalties for failure to comply with offshore account disclosure reporting and filing requirements.

Do American expats living abroad have to report foreign property on Form 8938?

You do not have to report foreign property on Form 8938 or other FATCA forms, even if it is a rental property.

Under certain circumstances, you may be required to file Form 3520 to report a distribution from a foreign trust, foreign estate, or gift from a foreign person over $100,000 during the year.

Visit this link to see more common questions and answers from the IRS on Form 8938.

Suppose you’re unsure what constitutes a foreign financial asset to the IRS. In that case, it includes any financial account maintained by a foreign financial institution, other foreign financial assets such as stock or securities issued by someone other than a US person, any interest in a foreign entity and any financial instrument or contract that has an issuer who is not a US person.

Can the IRS check foreign bank accounts?

The IRS can find a foreign bank account.

This is why interest and dividends from your foreign bank accounts must be reported on your annual tax return, including foreign disclosure forms and statements on the Form 1040 US tax return.

Foreign accounts are taxable, so the IRS and US Treasury have rigorous processes to declare overseas assets.

Any American citizen with foreign bank accounts totalling more than $10,000 in aggregate must report such accounts.

One of the main catalysts for the IRS to learn about foreign income, which was not reported, is through FATCA.

In accordance with FATCA, more than 300,000 FFIs (Foreign Financial Institutions) in over 110 countries actively report account holder information to the IRS.

The purpose of FATCA is to force managers of foreign financial institutions to report all American clients to the IRS or be severely punished with high withholding taxes.

The fund manager will still be penalised if the reported information is not 100% accurate or complete.

Some countries have data protection laws that would be broken if the fund manager cooperates fully with the IRS.

A fund manager may not realise that a non-American third party represents an American client.

The client may not provide the fund manager with the required information in the first place.

The penalty is solely applied to the fund manager, not the US ex-pat client.

A non-cooperative American ex-pat client could be seen to be more hassle than they are worth to a UK fund manager.

FATCA can cause fund managers to deal differently with US ex-pat clients, but it is in the best interests of fund managers to continue working with American clients in the UK.

How to file 8938

One of the key differences of the form 8938 Vs FBAR is that the latter is not filed with the IRS. The 8938 is filed with your 1040 tax return to the IRS each year. So, next time you wonder how to file a 8938 form please note that you attach it to your 1040 tax return.

FBAR threshold filing requirement FAQ

Is FBAR requirements for non residents?

Only Americans and those resident aliens that file a 1040 tax return to the Internal Revenue Service (IRS) are required to file an FBAR

What if my foreign bank account is less than $10,000?

An FBAR needs to be filed if at any point the foreign bank accounts meet and exceeds $10,000 in the year

Do I need to file FBAR if I don't file taxes?

You may not need to file a 1040 tax return if your earnings are below the standard deduction. However, an FBAR may still be required to file if you have foreign bank accounts that exceed $10,000 at any point in the year.

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FBAR reporting & filing, including FinCEN Form 114, deadlines. Tips on how and when to file & submit your report

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