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Expat Articles » US Expats: Differences between the FBAR vs. Form 8938

US Expats: Differences between the FBAR vs. Form 8938

Working abroad as a US expat is an enticing option for many individuals. It gives many US expats the opportunity to completely immerse themselves in a new culture and learn about the local customs and traditions. It also allows individuals to live, shop, dine and do banking like the locals.

However, not all of these activities are as hassle free as you might assume. Whenever finances are involved, things become a little more complicated. And, for US expats with foreign accounts, there may be certain things that need to be filed with the US government.

In recent years, the US government has implemented new measures to crack down on US expats evading their US tax and/or foreign bank account reporting obligations. The newest development is in the form of the Foreign Account Tax Compliance Act (FATCA). This act is designed to help identify tax evaders by requiring foreign financial institutions to disclose financial accounts held by US taxpayers.

US expats who meet the minimum filing requirements specified under FATCA must report their foreign assets using Form 8938. The filing thresholds, which are listed below, apply to individuals and businesses with foreign financial assets, including but not limited to bank accounts, pensions, mutual funds and stocks. It’s important to note that there are different filing thresholds for individuals living in the US and those living abroad. For US expats, Form 8938 must be filed based on the following:

In addition to FATCA, US expats should also be aware of the FBAR. US expats with $10,000 or more in a foreign bank or financial institution are required to file FBAR Form TDF 90-22.1. It is important to note that this amount is aggregate — all foreign accounts are considered together as whole. So if you have $3,000 in 4 different foreign accounts you need to report all 4 of these accounts via the FBAR.

Unlike Form 8938, this form is not part of your US tax returns. The FBAR must be received by the Department of the Treasury no later than June 30th each year.

Although FATCA and Form 8938 are new to the 2012 tax year, the FBAR has been around for a while. As a result, those who fail to file could potentially face financial or even criminal penalties (although in our experience the IRS has been quite lenient on US expats who did not realize they need to file). If you have any financial accounts abroad or a financial interest in foreign accounts, it’s important to understand the requirements for each of these forms.

If you have fallen behind on your US tax filing, now is the time to get caught up. There are two key programs - the IRS Streamlined Procedures and the Offshore Voluntary Disclosure Initiative – which help reduce your filing burden and avoid harsh penalties, if you qualify.

About Greenback Expat Tax Services

David McKeegan, co-founder and co-president of Greenback Expat Tax Services, wrote this article in June 2013. Greenback is a team of CPAs and Enrolled Agents that specializes in US expat tax preparation. If you have questions about reporting your foreign financial accounts or if you’d like help completing these forms, contact Greenback Expat Tax Services