Some taxpayers are confused about the new Form 8938 and FinCEN Form 114 (Report of Foreign Bank and Financial Accounts). Simply put, the new form does not in any way replace or affect your responsibility as a taxpayer to file the existing FinCEN Form 114. Taxpayers must file each form.
To better understand these two, as well as FBAR amnesty in Washington, DC, get in touch with your tax experts, such as U.S. International Tax Advisors. We can give you more information about international tax compliance, such as foreign bank account reporting and consulting. Nevertheless, here are six things you need to know about Form 8938 and FinCEN Form 114:
Who should file?
According to the Internal Revenue Service (IRS), everyone, from U.S. citizens to resident and certain nonresident aliens, needs to file Form 8938. FinCEN Form 114, on the other hand, requires trust estates and domestic entities to file, in addition to U.S. citizens and resident aliens.
Does this include the U.S. territories?
Form 8938, or the Statement of Specified Foreign Financial Assets, doesn’t include the U.S. territories. However, U.S. citizens, trust estates, resident aliens, and domestic entities that are interested in foreign financial accounts must file FinCEN Form 114.
What is the reporting threshold or total value of assets?
For Form 8938, there is a $50,000 total value of assets on the last day of the tax year. It can also be $75,000 anytime throughout the tax year. While for FinCEN Form 114, the reporting threshold for the total value of assets is $10,000 anytime throughout the tax year.
What should be reported?
For Form 8938, the maximum value of foreign financial assets, including accounts with financial institutions and other nonaccount investment, assets must be reported. For FinCEN Form 114, you must report the financial accounts’ maximum value, which are maintained by an institution that is located in a foreign country.
How are asset values or maximum account determined and reported?
With Form 8938, the exchange rate at the end of the year will be used when converting each reported account and asset to U.S. dollars. The report will be generated in U.S. dollars. For FinCEN Form 114, when identifying the maximum value in the account’s currency, the taxpayer’s periodic account statements will be used. At the end of the year, it will then be converted using the latest exchange rate. The report will likewise be in U.S. dollars.
What are the penalties?
For Form 8938, failure to disclose will result in up to a $10,000 penalty. Furthermore, nonfiling after an IRS notice will have an additional $10,000 penalty every 30 days. This also applies to criminal penalties. In FinCEN Form 114, a $10,000 penalty will apply for the nonwillful. For the willful, a penalty of up to $100,000 or 50% of account balances will apply. The same goes for criminal penalties.
As your FATCA consultants serving the Washington, DC area as well as serving clients across the U.S. and globe, US International Tax Advisors can provide more information about these forms. We also give professional tax advice and service, which will help you understand the complex tax laws and reporting regulations.
To get started, simply give us a call at (844) 796-8565 and we will be ready to assist you.