Is The Same Foreign Account Listed on FBAR & Form 8938?
Do I File FBAR & Form 8938 for the Same Foreign Account?
Oftentimes, when U.S. taxpayers have to report foreign accounts, assets, and investments to the U.S. government, they must file duplicate forms for the same asset or account category. For example, if a taxpayer owns a foreign bank account and meets the threshold requirements for both the FBAR and Form 8938, the taxpayer must file both forms in the same year for the same accounts/assets. Sometimes, the asset is only required to be reported on one form and not the other, but oftentimes, assets are duplicated on both forms. In addition, other forms of taxpayers may have to report the acid on as well. For example, if the taxpayer has a foreign securities account that has bank accounts and foreign mutual funds, the taxpayer may have to file the FBAR, Form 8938, and Form 8621. Let’s look at some of the quick basics about duplicative FBAR & FATCA reporting.
Not All Foreign Assets are Duplicated
Even though there are several assets that the taxpayer may own that are required to be reported on both forms, not all assets are duplicated.
For example, if a taxpayer has signature authority over foreign accounts, he may be required to report them on the FBAR and not Form 8938 (if he does not have a financial interest in the account). Likewise, if the taxpayer owns shares in a foreign corporation (presuming he is below the Form 5471 threshold requirements), he may have to report the asset on Form 8938 but not the FBAR.
Both Form Thresholds Must be Met
If an asset is the type of asset that is required to be reported on both forms, it is important to note that the taxpayer must meet the threshold requirements for both forms. While the threshold requirements for the FBAR are relatively low, +$10,000, the threshold requirements for Form 8938 will vary depending on whether the taxpayers are filing single slash separately or jointly and whether the taxpayer is a U.S. resident or a foreign resident.
Reported to Two Different Agencies
The FBAR and IRS Form 8938 are not reported to the same government agency. The Form 8938 is filed with the US tax return and submitted to the IRS, whereas the FBAR is an electronic form that is filed directly on the FinCEN website.
Different Due Dates
The Form 8938 is due when the taxpayer submits their tax return. Therefore, if the taxpayer files an extension to file his tax return, the Form 8938 goes on extension as well without having to file a separate extension form. Meanwhile, the FBAR is typically due on April 15th, but for the past several years, it has been on automatic extension to October. Taxpayers should be sure to check each year to see whether the IRS is continuing to provide an automatic extension for the FBAR.
Different Penalty Schemes
The penalty schemes for both the FBAR and Form 8938 are different. In general, the penalty for Form 8938 is $10,000 per year, and it has not adjusted for inflation in prior years. The FBAR penalty is also $10,000 per year when the person is non-willful, but it does adjust for inflation and is currently around $17,000. Likewise, the penalties for willful FBAR violations are much higher and typically start at 50% value of the unreported accounts or $100,000, whichever is higher– noting that the $100,000 also adjusted for inflation and is closer to $170,000.
Late Filing Penalties May be Reduced or Avoided
For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.
Current Year vs Prior Year Non-Compliance
Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Need Help Finding an Experienced Offshore Tax Attorney?
When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.