Expats and other taxpayers who are living overseas may be required to file Form 8938 and FBARs if they open a financial account in a foreign country. A failure to meet these requirements could lead to massive tax penalties.
Form 8938, Statement of Specified Foreign Financial Assets, is filed along with your regular tax return. U.S. Citizens and residents, as well as certain corporations, partnerships, and trusts, may be required to file this form.
The Form 8938 filing requirement is based on the aggregate value of your foreign assets. The threshold amounts for taxpayers living abroad are as follows:
- $400,000 on the last day of the year, or $600,000 at any time during the year, for married taxpayers who file jointly
- $200,000 on the last day of the year, or $300,000 at any time during the year, for all other taxpayers
These threshold amounts are significantly higher than the thresholds for FBAR filing. However, there are also assets that count towards the threshold amount for Form 8938 that are not covered on the FBAR.
Foreign stock or securities that are not held in a financial account, foreign partnership interest, and foreign private equity funds are all reportable on Form 8938, but not on the FBAR.
The FBAR filing requirement is not impacted by whether you live in the U.S. or abroad. If your aggregate foreign financial accounts exceeded $10,000 at any point during the year, you need to file an FBAR.
The FBAR is not part of your tax return. It is filed separately with the Financial Crimes Enforcement Network.
The penalties for failing to file an FBAR are generally $10,000 per violation for non-willful violations, and up to $100,000 or 50% of the aggregate account balance for willful violations.
A failure to file Form 8938 can result in a $10,000 penalty, with an additional $10,000 penalty for every 30 days of noncompliance after receiving an IRS notice for a failure to disclose. The maximum penalty is $60,000.
Make sure you understand the consequences of opening a bank account or investing in foreign companies. If you have failed to file Form 8938 or an FBAR for previous tax years, discuss your offshore disclosure options with a tax attorney.
The Gartzman Law Firm can help you with unfiled FBARs and other IRS tax problems. Use our contact form to request a consultation with an Atlanta tax resolution attorney.