The One-Two Punch of FBAR & FATCA: Do I File Both Forms?

When are FBAR & FATCA (Form 8938) Both Required to be Filed?

When Do You File Both FBAR & FATCA Form 8938?

Each year, there are various different international information reporting forms that a US taxpayer may have to file with the IRS and FinCEN in order to disclose their foreign accounts, assets, investments, and income. Two of the most common offshore reporting forms are the FBAR (Foreign Bank and Financial Account Reporting aka FinCEN Form 114) and Form 8938 (Foreign Account Tax Compliance Act aka FATCA). Even though both of these forms may require the taxpayer to disclose the same assets, they are still both required to be filed in any year that a Taxpayer meets threshold requirements for filing both forms –– even if they are reporting the same assets on both forms. Here are five (5) examples of when the FBAR and Form 8938 are (usually) both required to be filed:

Foreign Bank Accounts for FBAR & FATCA

When a Taxpayer has foreign bank accounts, they are required to be filed on both the FBAR and FATCA Form 8938. Depending on which country the Taxpayer has overseas accounts, this may include several different types of accounts:

• • • Checking Accounts

    • Savings Accounts

    • Current Accounts

    • Salary Accounts

    • Resident Accounts

    • Non-Resident Accounts

    • Fixed Deposits

    • Term Deposits

Foreign Stock Accounts for FBAR & FATCA

Foreign stock accounts or another type of investment account held at a Foreign Financial Institution (FFI) that is required to be included on both FBAR and FATCA Form 8938. A common nuance for stock, in general, is that while the stock account is required to be reported on both forms, if the same stock is held as actual stock certificates — and not in an account — the individual stock certificates are not included on FBAR because they are not held in a financial account – but they are included on the Form 8938.

*Some specific exceptions may apply to stock certificates in a safety deposit box at a Foreign Financial Institution that is accessible by the FFI.

Foreign Investment Accounts & Individual Funds are Required Too

Whether or not a Taxpayer owns investment funds such as mutual funds, ETFs, or SICAVs in an actual account or individually – they are required to be included on both the FBAR and FATCA Form 8938. This can (understandably) get confusing for taxpayers who may own foreign mutual funds in various portfolios, but they are not technically within an account – they are still reported on both forms.

Foreign Pension Plans for FBAR & FATCA

Foreign pension plans are a very common type of international account that is required to be disclosed on both the FBAR and FATCA Form 8938. This is because foreign pension plans generally have accounts numbers and are held in foreign financial institutions. Common types of reportable pensions are CPF, EPF, MPF, Superannuation, and Pillar 2 and 3 Pension Plans across the globe.

Foreign Life Insurance Policies for FBAR & FATCA

One of the most confusing aspects of international foreign account reporting involves disclosing foreign life insurance policies.  In many countries, a life insurance policy is not so much a life insurance policy with a death benefit, as it is an investment wrapper containing mutual funds and other equities that are wrapped within a life insurance policy. The mere fact that the investments are held within a life insurance policy does not negate the fact that the policy must be reported –– when there is a surrender value or cash value to the asset.

IRS International Tax Amnesty Programs

The Form FBAR and FATCA Form 8938 Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.

Some of the more common programs include:

• • • Voluntary Disclosure Program (VDP or “New” OVDP)

    • Streamlined Domestic Offshore Procedures

    • Streamlined Foreign Offshore Procedures

    • Delinquency Procedures

    • Reasonable Cause

Can I Just Start Filing FBAR & Form 8938 This Year Instead?

No, unless the current year is the first year you had a Form 8938 Reporting requirement. If you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as a Quiet Disclosure. The IRS has warned taxpayers that if they get caught in a Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.

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