Your Questions Answered: 8938 vs FBAR
Updated: Nov 3
Over the years, we've been asked many questions by our clients has to how form 8938 differs from the FBAR. Here is a list of the most frequently asked questions we receive along with comprehensive answers. We hope you fine it helpful.
How is Form 8938 different from FBAR?
The key difference lies in the forms' purposes, the types of assets reported, the reporting thresholds, and the governmental bodies they are reported on the FBAR has a lower threshold and is filed with the Treasury, while Form 8938 includes more types of assets, has higher thresholds, and is filed with the IRS.
How Do the Reporting Thresholds Differ for FBAR and Form 8938?
The thresholds for reporting foreign financial assets are different for FBAR and Form 8938. For FBAR, you must report if your aggregate foreign account balances exceed $10,000 at any time during the year. For Form 8938, the thresholds are higher and vary based on marital status and residency (ranging from $50,000 to $600,000 depending on circumstances).
What Are the Main Purposes of FBAR and Form 8938?
Both FBAR and Form 8938 are used to report foreign financial assets, helping the IRS combat tax evasion by ensuring taxes are paid on income held in offshore accounts. FBAR focuses on foreign financial accounts, while Form 8938 is broader, including financial accounts and specified foreign financial assets such as ownership in foreign companies trusts.
Do I need to file 8938 if I filed FBAR?
Possibly, as FBAR and Form 8938 serve different purposes and have different thresholds and requirements. If your foreign financial assets exceed the relevant thresholds for both forms, you must file both, provided you meet other criteria.
Does Form 8938 replace FBAR?
No, Form 8938 does not replace FBAR. They are separate requirements, and you may need to file both forms depending on your specific foreign financial assets and the applicable reporting thresholds.
What gets reported on Form 8938?
Form 8938 requires you to report specified foreign financial assets. This includes foreign bank accounts, foreign stocks and securities, financial instruments, contracts with non-U.S. persons, and interests in foreign entities, among others, if they exceed the reporting thresholds.
Who needs to file the FBAR?
U.S. persons, including citizens, residents, corporations, partnerships, limited liability companies, trusts, and estates, must file an FBAR if they have a financial interest in or signature authority over foreign financial accounts exceeding $10,000 in aggregate value at any point during the calendar year.
What is the penalty for not filing an FBAR?
Failing to file an FBAR can result in severe penalties. Non-willful violations can incur penalties of up to $10,000 per violation. Willful violations are more serious, with penalties equal to the greater of $100,000 or 50% of the account balance at the time of the violation.
Can I file an FBAR myself?
Yes, you can file an FBAR yourself through the FinCEN's BSA E-Filing System. It's important to accurately report all required information and file by the deadline, typically April 15, with an automatic extension to October 15.
What is FATCA and Form 8938?
FATCA refers to the Foreign Account Tax Compliance Act, aimed at combating tax evasion by U.S. persons holding investments in offshore accounts. Form 8938 is a requirement under FATCA, requiring U.S. taxpayers to report specified foreign financial assets.
What is the FBAR 25 account rule?
The FBAR 25 account rule allows individuals with financial interest in or signature authority over 25 or more foreign financial accounts to report the accounts collectively, rather than providing detailed information for each account. They must still provide detailed information upon request by the Secretary of the Treasury.
Is the FBAR reported in USD?
Yes, when filing an FBAR, you must convert all foreign account balances into U.S. dollars, using the Treasury's Financial Management Service rate from the last day of the calendar year.
What happens if you make a mistake on an FBAR?
If you discover a mistake on your FBAR after submission, it's important to take corrective action immediately. You can file an amended report through the BSA E-Filing System. Prompt correction can often reduce the possibility of penalties.
Does late FBAR filing trigger an audit?
Late FBAR filing doesn't automatically trigger an audit but failing to file or inaccurately filing your FBAR can attract IRS attention. It's crucial to comply with the filing requirements or work with a tax professional if you're filing late.
What Steps Should I Take If I've Never Filed FBAR or Form 8938?
If you've never filed an FBAR or Form 8938 and should have, it's important to start the process as soon as possible. Consider entering the IRS's Streamlined Filing Compliance Procedures, which allow for penalty-free rectification if the failure to file was non-willful.
CPAs for Expats is here to guide you every step of the way
Navigating the complexities of foreign financial reporting can be challenging, but you don't have to do it alone. At CPAs for Expats, we specialize in simplifying this process for you. With our low fees and a stellar 4.9/5 rating on platforms like Trustpilot, our expert team is equipped to provide you with the guidance and support you need to confidently handle your tax obligations. Contact us today, and experience unparalleled peace of mind with your expat taxes.