Many of our clients confess to some confusion (or lots!) about whether they have to complete Form 8938, FinCEN Form 114, or both, so we'd like to shed some light on the situation.
What are they?
IRS Form 8938 is required under the Foreign Account Tax Compliance Act or FATCA for reporting assets held abroad. FinCEN Form 114 (formerly known as FBAR, or Foreign Bank Account Report) meanwhile is specifically for reporting bank accounts abroad, including in foreign branches of US institutions where one has $10,000 or more (in aggregate, in all accounts) at any time during the tax year. Sound similar so far? Read on.
US citizens resident in the US and resident aliens need to file Form 8938 if they have assets worth more than $50,000 abroad.
US expats meanwhile (along with anyone with a green card or an unresolved claim or right to US citizenship, including dual citizens) who spent at least 330 days of the year outside the US, must file form 8938 if they have assets abroad worth more than $200,000 at the end of the tax year, or more than $300,000 at any point during the year if they are single or file separately from their spouse; or, if they are married and filing jointly, $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
FinCEN Form 114 meanwhile must be filed by anyone with at least $10,000 in accounts abroad (in aggregate, in all accounts) at any time during the tax year, even if the account is held for them by someone else, such as an agent, lawyer, or other representative. Having signature authority on accounts (whether with a spouse or employers’ accounts, for example) requires FinCEN Form 114 filing as well.
So some people will have to file neither, others just FinCEN form 114, and others again both, depending on one’s individual circumstances.
When do you need filing by?
Form 8938 should be filed at the same time as the annual income tax return, so on April 15th if you live in the US, or on June 15th if you live abroad, unless you have applied for the extension until October 15th.
FinCEN form 114 is due by June 30th , however starting in 2017 (so for 2016 tax year filing) it will be due on April 15th, with an automatic extension available until June 15 for expats or October 15th for expats who have filed an 'additional' extension . This is a positive change as it helpfully synchronizes all one's filings, including US income tax, FATCA and FBAR.
What happens if I don't file?
In short, horrible penalties.
The penalty for not filing Form 8938 is up to $10,000, followed by a further $10,000 for every 30 days of non-filing after receiving an IRS notice of a failure to disclose, up to a potential maximum penalty of $60,000.
If failure to file a FinCEN form 114 is non-willful, again the penalty is up to $10,000. If the failure to file is willful though, the penalty is $100,000 or 50 percent of account balances, whichever is greater.
In both cases criminal penalties may also apply.
What happens if I haven't filed?
Happily though the IRS has an amnesty programme called the Streamlined Procedure which offers expats who haven't yet filed a penalty-free route to compliance, if they certify that their non-compliance was non-willful. They must also file in retrospect and pay any back taxes due.
Bright!Tax takes the stress out of US expat tax returns. If you have any questions or would like some advice, get in touch here and we would be happy to help.