FATCA vs. FBAR – International Tax Forms | IRS FATCA vs. FBAR (Golding & Golding)

FATCA vs. FBAR – International Tax Forms | IRS FATCA vs. FBAR (Golding & Golding)

FATCA vs. FBAR – International Tax Forms | IRS FATCA vs. FBAR

FATCA vs. FBAR: FATCA and FBAR are two of the most common acronyms in IRS International Tax law compliance.

FATCA is the Foreign Account Tax Compliance Act. FBAR is the Foreign Bank Account Reporting aka FinCEN 114 aka Report of Foreign Bank and Financial Accounts.

While the acronyms both work to achieve the same outcome (IRS Offshore Compliance), they are not the same.

FATCA

Foreign Account Tax Compliance Act (FATCA) was enacted in 2010, with enforcement commencing in 2014. FATCA is designed to facilitate global offshore compliance.

The U.S. has entered into FATCA Agreements (aka Intergovernmental Agreements) with more than 110 different countries. The agreements are reciprocal (for those of who you may have not reported your U.S. Assets to the foreign government.)

FATCA impacts both Foreign Financial Institutions (reporting and exchange of information) and Individuals, Trusts, Entities, etc. The Foreign Institutions report Account Holders to the U.S. and the Account Holders report their account and asset information to the IRS on their tax return.

Individuals file the Form 8938 to report this information to the IRS.

Penalties

Form 8938 penalties will vary, depending on your particular facts and circumstances. You may even be able to obtain a penalty waiver using Streamlined Foreign Offshore Procedures or Reasonable Cause (if the IRS agent is feeling friendly) and avoid being penalized upwards of $60,000 (for multiple years of non-compliance) 

Threshold

There are four main thresholds for individuals is as follows:.

  • Single or Filing Separate (in the U.S.): $50,000/$75,000
  • Married with a Joint Returns (In the U.S): $100,000/$150,000
  • Single or Filing Separate (Outside the U.S.): $200,000/$300,000
  • Married with a Joint Returns (Outside the U.S.): $400,000/$600,000

Requirements

FATCA  (Taxpayers) is required by certain individuals who have ownership of Specified Foreign Financial assets.  The types of assets range from certain bank accounts or other financial accounts to ownership of foreign businesses, foreign investments — and everything in between.

Not everybody has to file the form even if they have specified foreign financial assets. Rather, it depends on whether they meet certain threshold requirements, or if they have to file an alternative form for the same asset, such as a 5471 or 8865.

The requirements will vary depending on whether the person is filing single/married filing separate or jointly and whether the person it Is considered a US resident or foreign residence.

Deadline

FATCA filing is due at the same time the 1040 is due to be filed (including extensions)

What is a Specified Foreign Asset?

As provided by the IRS, a Specified Foreign Financial Asset includes“

(1) any financial account (as defined in section 1471(d)(2)) maintained by a foreign financial institution (as defined in section 1471(d)(4)), and

(2)any of the following assets which are not held in an account maintained by a financial institution (as defined in section 1471(d)(5))—

(A) any stock or security issued by a person other than a United States person,

(B) any financial instrument or contract held for investment that has an issuer or counterparty which is other than a United States person, and

(C) any interest in a foreign entity (as defined in section 1473)

Section 1471(d)(2) – Financial Accounts

Section 1471 (d)(2) refers to Financial Accounts, and typically includes a depository account, a custodial account, and equity or debut interested.

Section 1471(d)(5) – Financial Accounts

This section is written as a double negative. In other words, what the code is saying is that if you hold any assets such as stock, security, any financial instrument held for investment or an interest in a foreign entity – even if it is not maintained in a financial institution – it still needs to be reported.

FBAR

FBAR (Foreign Bank Account Reporting aka FinCEN 114 aka Report of Foreign Bank and Financial Accounts) is used to report Foreign Bank and Financial Accounts.

 It is a U.S. Tax law that impact U.S. Persons who are Foreign Account Holders. It does not matter whether the foreign country where the account is located entered into a FATCA Agreement, and it does not matter if the U.S. person actually files a tax return.

In other words, if a person meets the FBAR filing threshold, they must file the FBAR even if they do not have to file a Tax return in that year.

Penalties

The penalties for FBAR vary extensively. 

The IRS can issue an FBAR penalty for not reporting foreign bank accounts or filing them late. While the non willful FBAR Penalty is the most common penalty issued, the IRS has big leeway in making its FBAR Penalty Calculation — which will vary based on willful vs. non-willful, and civil vs. criminal.

There are various different types of foreign bank account penalties. The most common type of IRS FBAR Penalties is a non-willful FBAR penalty. Whether the FBAR is non-filed or late-filed, the penalties are usually the same.

The IRS has big leeway to assess penalties for the FBAR. Once you miss the FBAR Filing Deadline, the IRS sees you as “fair game.”

Threshold

Not everyone who has foreign accounts is required to file an FBAR. Rather, it is required to be filed by all U.S. Account Holders (whether they reside in the U.S. or overseas) with foreign accounts that have an “annual aggregate total” exceeding $10,000 at any time during the year.

Thus, if a U.S. Taxpayer (including Legal Permanent Residents “aka Green Card Holders”) maintains foreign accounts, including banks accounts, financial accounts, or insurance policies that have a combined value of more than $10,000 (or has indirect ownership of the account or signature authority), then that person is required to file an FBAR statement.

Requirements

FBAR Requirements are complex. We have prepared a 10-step FBAR guide to assist you.

Deadline

The deadline for Filing FBAR is on automatic extension. That means you have until October 2019 to file your 2018 FBAR. 

Out of FATCA or FBAR Compliance?

You have options, and depending on the facts and circumstances of your situation, your options may include the streamlined program, reasonable cause, or the delinquency procedures – which may result in significantly reduced fines and penalties (and may even receive a penalty waiver).

Golding & Golding – Board Certified in Tax Law

Golding & Golding represents clients worldwide in over 70-countries exclusively in Streamlined, Offshore and IRS Voluntary Disclosure matters. We have successfully completed more than 1000 streamlined and voluntary disclosure submissions.

Our Team Lead is a Board Certified Tax Law Specialist (Less than 1% of Attorneys nationwide) and Enrolled Agent, with a Master’s of Tax Law (LL.M.)

Mr. Golding leads his team in each and every case we accept for submission.

We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.

Golding and Golding, Board-Certified Tax Law Specialist

Golding and Golding, Board-Certified Tax Law Specialist

Golding & Golding: Our international tax lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70+ different countries. Managing Partner Sean M. Golding is a Board-Certified Tax Law Specialist Attorney (a designation earned by < 1% of attorneys nationwide.). He leads a full-service offshore disclosure & tax law firm. Sean and his team have represented thousands of clients nationwide & worldwide in all aspects of IRS offshore & voluntary disclosure and compliance during his 20-year career as an Attorney.

Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
Golding and Golding, Board-Certified Tax Law Specialist