Form 8938 refers to the Statement of Specified Foreign Financial Assets while FinCEN Form 114 refers to an FBAR or Report of Foreign Bank and Financial Accounts. U.S. taxpayers that own foreign assets need to distinguish the requirements related to both of these forms. The following is the second part of a blog that compares Form 8938 and FBAR requirements.
What is reported?
The maximum value of specified foreign financial assets is reported on Form 8938. These assets 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 is reported on an FBAR.
How are maximum account or asset values determined and reported?
Form 8938
Fair market value in U.S. dollars is determined in accord with the Form 8938 instructions for each account and asset reported. This amount should then be converted to U.S. dollars using the exchange rate at the end of the calendar year and reported in U.S. dollars.
FBAR
Periodic account statements are used to determine the maximum value in the currency of the account. This amount should then be converted to U.S. dollars using the exchange rate at the end of the calendar year and reported in U.S. dollars.
When are these forms due?
Form 8938 is attached to a taxpayer’s annual return and due on the date of this return, including any applicable extensions. An FBAR must be received by June 30th and no extensions of time may be granted.
Where are these forms filed?
Form 8938 is filed with a taxpayer’s income tax return pursuant to instructions for filing the return. An FBAR is not filed with a federal tax return but filed electronically through the FinCEN E-filing system.
Penalties for noncompliance and failure to disclose
Penalties consist of fines up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing a Form 8938 after the receipt of an IRS notice of a failure to disclose. Thus, the potential maximum penalty is $60,000 and criminal penalties may also apply. Penalties related to FBAR filings or non-filings, if non-willful, may be up to $10,000. If willful, the penalty is up to the greater of $100,000 or 50 percent of account balances and criminal penalties may also apply.
If you have questions about the timely or delinquent filing of a Form 8938 or FBAR, or questions about foreign holdings, assets, or accounts, contact THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
