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Expat Articles » FBAR and FATCA: Do You Need to File?


FBAR and FATCA: Do You Need to File?

ExpatCareers.com FBAR and FATCA TaxMost US expats have heard of FATCA (Foreign Account Tax Compliance Act). In fact, in a recent Greenback survey of over 1,800 expats, a whopping 83% of respondents were aware of its existence! FBAR (Foreign Bank Account Report) is another acronym expats have heard of—but do you really know what these two initiatives are all about? Do you know if you need to file either of them? We understand FBAR and FATCA can be confusing, but we are here to sort it all out for you!

What are FBAR and FATCA?

FBAR (Foreign Bank Account Report) and FATCA (Foreign Account Tax Compliance Act) are both part of the recent US initiative to uncover tax cheats hiding assets in overseas accounts and collect on taxes owed. Billions of dollars have been recovered to date and the IRS shows no signs of slowing down their efforts to collect even more. FATCA has been in the international spotlight in particular, as foreign financial institutions are being forced to report on the accounts of their American clients. The burden of the additional filing requirements has reportedly caused serious banking issues for Americans living abroad, as some banks are refusing to work with Americans and simply closing their accounts for refusing their business outright. 

FBAR

FBAR is a report of foreign bank accounts and your reporting requirements are based solely on your account balances overseas. If you have had $10,000 or more in your foreign bank accounts (or have signature authority over such an account) at any point during the year, you must file FBAR. This is an aggregate balance—meaning, if you had $3,000 in one account and $8,000 in another, the combined account balances exceed the threshold and both accounts must be reported.

The FBAR is not filed with your US Federal Tax Return because it actually doesn’t go to the IRS—it is sent electronically to the US Treasury Department via FinCEN Form 114. The filing deadline is June 30th and unlike your US tax return, no extensions are available. 

FATCA

FATCA filing requirements are a little different than FBAR. While FBAR’s filing requirements relate solely to your bank account balances, FATCA reporting requirements are a bit more broad—and definitely a little more confusing! You must file FATCA if the value of specified foreign assets (which actually include bank accounts) exceed the filing threshold. Specified foreign financial assets include things such as:

And to make it even more confusing, reporting thresholds are different for those living abroad and those currently residing in the US. 

Thresholds for US residents:

Thresholds for those residing outside the US are much higher:

Since you file FATCA Form 8938 with your US Federal Tax Return, any extensions you file for apply to your FATCA filing as well.    

One thing to note: If your income falls below the US tax filing threshold (i.e. you aren’t required to file a tax return in any given year) you are actually not required to file Form 8938, even if the value of your specified foreign assets exceeds the FATCA filing threshold.

So they are similar and different?

FBAR and FATCA are both part of the US initiatives to thwart tax cheats, but as noted above, the filing requirements are different. You may need to file one, the other, both or neither! Being required to file Form 8938 does not necessarily create an FBAR filing requirement (or vice versa). It’s important to look closely at the specific requirements of both to determine which you may need to file.

To help clear up any lingering confusion, check out this detailed chart with a side-by-side comparison which outlines the differences between FBAR and Form 8938 filing requirements. 

What if I have never filed either?

This is a very common situation with expats who are just learning about their filing responsibilities. Luckily, the IRS has created a program that is perfect for you—the Streamlined Filing Procedures. For innocent US taxpayers who truly didn’t know they had to file (as opposed to those purposely hiding their assets), simply filing the last three year’s tax returns and last six year’s FBARs will get you caught up. And the best part? The IRS is currently waiving all late filing and FBAR penalties, which is a huge relief. 

If you are behind, we highly recommend you get caught up. If you come forward voluntarily to become compliant, the IRS will be much more reasonable than if they find you first! And penalties for failing to file either FBAR or FATCA are steep. You are much better off taking advantage of their amnesty program now—especially because they haven’t set an end date to the program, which means they could reinstitute the penalty fees at any time. There are specific instructions on how to file under the Streamlined Filing Procedures in this article on our blog. 

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© Article written by: David McKeegan, co-founder of Greenback Expat Tax Services

Greenback Expat Tax Services specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and IRS Enrolled Agents who have extensive experience in the field of expat tax preparation. For more information about FBAR, FATCA, Greenback Expat Tax Services or other US expat tax issues, please email info(at)greenbacktaxservices(dot)com and visit www.greenbacktaxservices.com.