When it comes to reporting foreign financial accounts as a US taxpayer abroad, there are two main forms to consider: FBAR and Form 8938. While they share many similarities, there are key differences between these two forms that can make a big difference in your reporting obligations and potential penalties for non-compliance. In this blog post, we’ll provide a side-by-side comparison of FBAR and Form 8938 to help you understand the similarities and differences between the two forms, and make an informed decision about which one to use for reporting your foreign accounts. Let’s dive in!
What is the difference between Form 8938 and FBAR?
| Form 8938 (FATCA) | FBAR (FinCEN Form 114) | |
|---|---|---|
| Who must file? | Specified individuals (US citizens, resident aliens, and certain non-resident aliens) and domestic entities that have an interest in specified foreign financial assets and meet the reporting threshold. | US persons (US citizens, resident aliens, trusts, and estates) that have an interest in foreign financial accounts and meet the reporting threshold. |
| Does it include US territories? | No, it doesn't include US territories. (Puerto Rico, American Samoa, Guam, The United States Virgin Islands, and The Northern Mariana Islands) | Yes, resident aliens of US territories and US territory entities are subject to FBAR reporting. |
| What's the reporting threshold? | For U.S. taxpayers who live in the United States and are married filing jointly, the threshold is met if the total value of their foreign assets is more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year. For unmarried taxpayers who live in the United States, the threshold is met if the total value of their foreign assets is more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the tax year. For married taxpayers filing jointly who live abroad, the threshold is met if the total value of their foreign assets is more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the tax year. | The aggregate value of all foreign financial accounts exceeds $10,000. |
| What is reported? | The maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets. | The maximum value of financial accounts maintained by a financial institution physically located in a foreign country. |
| How are maximum account or asset values determined and reported? | Fair market value in US dollars in accord with the Form 8938 instructions for each account and asset reported; convert to US dollars using the end of the taxable year exchange rate and report in US dollars. | Use periodic account statements to determine the maximum value in the currency of the account; convert to US dollars using the end of the calendar year exchange rate and report in US dollars. |
| When is the form due? | The form is due with your federal income tax return, including extensions. | The form is due April 15, with an automatic extension to October 15 available. |
| How to file? | With your federal income tax return. | Filed electronically through FinCEN’s BSA E-Filing System. |
| Penalties | Up to $10,000 for failure to disclose and an additional $10,000 for every 30-day period of non-filing up to a potential maximum penalty of $50,000. Criminal penalties may also apply. | Up to $10,000 per violation for non-willful failure to file. If your failure to file is considered willful, the fine can be $100,000 or 50% of the balance of the account at the time of the violation, whichever is greater. Criminal penalties may also apply. |
FBAR vs. Form 8938 Assets: Which Financial Accounts Are Reportable on Each Form?
The following chart highlights the factors that need to be considered to accurately verify your reporting obligations. It provides information on various foreign assets and whether they are reportable under FATCA and/or FBAR.
Related: FBAR and FATCA: Reporting Foreign Accounts as a US Expat
| Form 8938 (FATCA) | FBAR (FinCEN Form 114) | |
|---|---|---|
| Financial accounts held at a foreign financial institution | Yes | Yes |
| Financial accounts held at a foreign branch of a US bank | No | Yes |
| Financial accounts held at a US branch of a foreign bank | No | No |
| Foreign financial account for which you have signature authority | No—unless you have an interest in the account as described above | Yes |
| Foreign stock or securities held in a foreign brokerage account | The account is reportable; however, the stock within the account does not need to be reported separately. | The account is reportable; however, the stock within the account does not need to be reported separately. |
| Foreign stock or securities not held in a financial account | Yes | No |
| Foreign partnership interests | Yes | No |
| Indirect interests in foreign financial assets through an entity | No | Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail. |
| Foreign mutual funds | Yes | Yes |
| Domestic mutual funds that invest in foreign stock | No | No |
| Foreign accounts or non-accounts investments held by foreign or domestic grantor trusts where you are the grantor | Yes for both | Yes for foreign accounts |
| Foreign-issued life insurance or annuity with cash value | Yes | Yes |
| Foreign hedge funds and private equity funds | Yes | No |
| Foreign real estate held directly | No | No |
| Foreign real estate held through a foreign entity | No; however, the foreign entity is a specified foreign financial asset, and its value will include the value of the real estate. | No |
| Foreign currency held directly | No | No |
In conclusion, both FBAR and Form 8938 are important reporting requirements for taxpayers with foreign financial accounts. While both forms require disclosure of foreign assets and accounts, there are key differences in their reporting thresholds, filing requirements, and penalties for noncompliance.
FBAR has a lower reporting threshold of $10,000 and applies to a wider range of accounts, including bank accounts, securities accounts, and certain types of insurance policies. Form 8938, on the other hand, has higher reporting thresholds that vary depending on the taxpayer’s filing status and location, and only applies to specified foreign financial assets.
Taxpayers are encouraged to carefully review the instructions for both forms and consider seeking assistance from a qualified tax professional if they have any concerns about which form to file or how to properly report their foreign assets. Non-compliance with reporting requirements can result in significant penalties, including monetary fines and criminal charges.
It’s worth noting that Form 8938 is included in the standard tax return preparation fee, regardless of the number of accounts reported. Similarly, our FBAR tax preparation service is
priced at $100 regardless of the number of accounts being reported. Don’t hesitate to take action and get started now. Contact us today!
