A taxpayer should report his or her foreign bank accounts annually, so long as the foreign accounts meet certain reporting criteria. There are generally two reporting obligations and both have different measures: one requirement is IRS Form 8938, Statement of Specified Foreign Financial Assets, to be filed with your IRS Form 1040, and the other is an annual FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), filed electronically and separately from IRS Form 1040. While there are several other nuances to consider (e.g., what constitutes ownership, et al), the most notable criteria are the dollar amount threshold –
When to File IRS Form 8938 (filed with 1040):
- Unmarried individual (or MFS) living in U.S. – Total value of assets greater than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year.
- Unmarried individual (or MFS) living outside U.S. – Total value of assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.
- Married individual filing jointly living in U.S. – Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year.
- Married individual filing jointly living outside U.S. – Total value of assets was more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the year.
When to File a Report of Foreign Bank and Financial Accounts (FBAR) filed separately through FINcen:
- Aggregate value of financial accounts exceeds $10,000 at any time during the calendar year. This is a cumulative balance, meaning if you have 2 accounts with a combined account balance greater than $10,000 at any one time, both accounts would have to be reported (for example, account 1 = $5,000, account 2 = $6,000 = must report both).
And the penalties – some criminal – for failing to properly report and disclose foreign bank accounts are severe – some might say, the penalties are draconian.
IRS Form 8938 – Up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply.
FBAR – Civil monetary penalties are adjusted annually for inflation. Civil penalty assessments range from $10,000 per occurrence up to nearly $125,000 or 50% of account value if a “willful” violation. Criminal charges may also be filed against a noncompliant taxpayer who acted “willfully”.