As a United States citizen/resident or a company conducting business overseas, it is highly probable that you have a bank account in your country of residence. If yes, and you have been listening to the news headlines since 2014, you should be familiar with the acronyms FBAR and FATCA.
FBAR stands for Foreign Bank Account Reporting, while FATCA stands for Foreign Account Tax Compliance Act. The major difference between FBAR and FATCA is that the FATCA (8938) form must be included with your annual tax filings, while the other (FBAR) is submitted separately from your tax reports. These forms typically cover the same foreign assets information, yet FATCA goes more in depth and has a higher reporting threshold than the FBAR.
The FATCA form (8938) threshold is triggered (see below), based on three variables:
- The physical location of the taxpayer;
- Filing status utilized;
- The highest balances of the foreign assets, in aggregate, reached during the year.
| Filing Status | Inside the United States | Outside the United States |
| Single/Other | $50K on last day of the year or more than $75K at any time during the tax year | $200K on last day of the year or more than $300K at any time during the tax year |
| Married Filing Jointly | $100K on last day of the year or more than $150K at any time during the tax year | $400K on last day of the year or more than $600K at any time during the tax year |
| Married Filing Separately | $50K on last day of the year or more than $75K at any time during the tax year | $200K on last day of the year or more than $300K at any time during the tax year |
The FBAR report is used in order to report a financial interest in, or signature authority over, a foreign financial account. The FBAR must be e-filed, and it’s new due date is April 15th. There is an automatic 6 month extension available coinciding with the October 15th deadline.
It is important to note that:
- A United States person that has a financial interest in, or signature authority over, foreign financial accounts must file a FBAR report if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
- A financial account includes, but is not limited to, securities, brokerages, savings, demands, checking, deposits, time deposits, or other accounts maintained with a financial institution. A financial account also includes a commodity futures or options account, an insurance policy with a cash value, an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund.
- A foreign financial account is a financial account located outside of the United States.
The IRS has fortunately provided comprehensive definitions explaining financial interest and signature authority, and we have included them for your viewing as below:
Financial Interest:
- The United States person is the owner on record, or the holder of the legal title, regardless of whether the account is maintained for the benefit of the United States person or for the benefit of another person;
Signature Authority:
- Signature authority is the authority of an individual (alone or in conjunction with another individual) to control the disposition of assets held in a foreign financial account by direct communication (whether in writing or otherwise) to the bank, or other financial institution, that maintains the financial account.
At XPAT 1040, we have extensive experience in FBAR and FATCA requirements and always ensure that we assist our clients with precision and knowledge, using our simple filing process.
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