Top questions answered: FBAR and Form 8938 compliance for U.S. taxpayers
The IRS offers a streamlined filing program for eligible taxpayers who fail to report foreign assets properly. Knowing who qualifies, what needs to be filed and how to prepare a solid reasonable cause statement is key to helping clients reduce penalties.
FinCEN Form 114 and Form 8938 each have specific thresholds and requirements, and understanding the differences allows you to recommend the right path forward.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their corresponding answers. If you choose to attend the on-demand version of this webinar, you can access the full recording and the entire list of Q&As.
Q: How do you know when to file FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR), vs. Form 8938, Statement of Foreign Financial Assets?
A: The IRS has a very useful comparison chart that clearly explains what is reportable on both forms, which can be found on the following website: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements. Simply put, FBAR is for foreign financial accounts held in a foreign country with balances that exceed $10,000 at any point in a tax year. Form 8938 is more broad and has thresholds based on filing status and country of residence. The table below summarizes the reporting requirements.
| Location | Filing Status | End of Year Threshold (USD) | Any Time During Year |
|---|---|---|---|
| U.S. | Unmarried | $50,000 | $75,000 |
| U.S. | Married filing jointly | $100,000 | $150,000 |
| U.S. | Married filing separately | $50,000 | $75,000 |
| Abroad | Unmarried | $200,000 | $300,000 |
| Abroad | Married filing jointly | $400,000 | $600,000 |
| Abroad | Married filing separately | $200,000 | $300,000 |
Q: A Mexican citizen has a Mexican bank account over $10,000 USD, and the spouse, a U.S. citizen, is not on the account. Should they report both the FBAR and Form 8938 because the Mexican citizen has the foreign account? Or only file if the U.S. citizen is on the account?
A: Having an account is different from having signatory authority over an account, and this is what you have to discover. If the U.S. citizen (spouse) can write checks or authorize transfers (signatory authority), then technically, each spouse would file. However, a taxpayer may authorize their spouse to file on their behalf by filing Form 114a; then, only one FBAR needs to be filed. The thresholds for Form 8938 are higher and differ if taxpayers live in the U.S. or abroad. Check the thresholds in the table above.
Q: What are the minimum reporting thresholds for the reportable assets on each form?
A: The FBAR has one reporting threshold, which is when the balance of a foreign account exceeds $10,000 USD at any point in the year, using the Treasury Bureau of the Fiscal Service exchange rate for the last day of the calendar year. See the IRS chart above for the Form 8938 filing thresholds, which differ by country of residence.
Q: Does foreign real estate (not income-producing or a rental) need to be reported anywhere on Form 8938 or FBAR?
A: No, real estate is not considered a specified foreign asset reportable on Form 8938, and since it is not in a financial institution, FBAR does not apply.
About the author(s)
NATP Staff