Contributed by: PhillipB, FreeTaxUSA Agent, Tax Pro
FinCen Form 114
You may be required to file a FinCen Form 114 (also known as an FBAR) if the following conditions apply:
- You have a financial interest in or signature authority over foreign financial accounts that exceed certain thresholds.
- The total sum of all your foreign account balance(s) exceeds $10,000 at any point during the calendar year.
This report isn’t a tax form, but a disclosure of information to the Financial Crimes Enforcement Network, a bureau of the Department of Treasury. These reports, among many others, are used to help combat money laundering and other financial crimes. The FinCen Form 114 is due by April 15 of each year, with an automatic extension to October 15 (you don’t need to file an extension form). Failing to file the FinCen Form 114 can result in civil and criminal penalties. File the FinCen Form 114 separately from your tax return on the FinCen website.
There are some accounts that should not be included in an FBAR. They include:
- Correspondent accounts (accounts established by a bank for financial transactions with another financial institution)
- Nostro accounts (accounts kept by one bank at another, often foreign bank)
- Accounts owned by a government entity
- Accounts owned by an international financial institution
- Accounts maintained with a US military banking facility
- Accounts held in an IRA of which you are the owner or beneficiary
- Accounts holding physical property, precious metals, or art
Form 8938, Statement of Specified Foreign Financial Assets
You may be required to file Form 8938 if the following conditions apply:
- You’re a US person with ownership of specified foreign financial assets. Some of these are listed below, but for a complete list reference Instructions for Form 8938:
- Financial investments like stocks, bonds, or mutual funds in accounts with foreign brokerages
- Financial interests in hedge funds
- Interest in foreign partnerships or trusts
- Foreign pensions, annuities, or insurance contracts
- Any financial instrument or contract with parties that are not US persons
- The total value of all foreign assets is over the following amounts at the end of the tax year:
- $50,000 for single filer living in the US, or $200,000 for single filers living abroad
- $100,000 for married joint filers living in the US, or $400,000 for married joint filers living abroad.
Form 8938 is a tax form that reports the income and value of the specified foreign financial assets to the IRS, as part of the Foreign Account Tax Compliance Act (FATCA). Form 8938 is filed with your tax return by the deadline of the tax return, including extensions. Failing to file a Form 8938 can result in substantial penalties and interest.
The federal government is very serious about making sure these forms are filed as required. If you have signing authority over, or are an owner of financial assets, you need to make sure you review your foreign financial accounts each year to make sure you’re in compliance with the FinCen Form 114 and Form 8938 filing requirements.
