When is FATCA not Required to be Filed?
When is FATCA not Required to be Filed by US Taxpayers: In recent years, FATCA has added another level of international information reporting for Taxpayers across the globe. FATCA Refers to The Foreign Account Tax Compliance Act. Since 2010 and the introduction of 6038D, the Internal Revenue Service has aggressively enforced compliance with foreign account and asset reporting, such as FATCA and FBAR. For US Persons (whether they reside within the United states or abroad) they are required to file an IRS Form 8938 — along with their tax return to report FATCA specified foreign financial assets. Some Taxpayers will be happy to learn that, despite having certain foreign assets overseas such as bank accounts, investment accounts and/or pension plans and life insurance — which would be otherwise reported on FATCA — they are (generally) not required to file the annual Form 8938. Let’s go through some of the basics of when you don’t have to file FATCA because you meet one of the exceptions or exclusions to reporting:
*If you are determining whether or not FATCA Reporting is necessary for a specific asset/account, you should consider speaking with a Board-Certified Tax Specialist.
FATCA if No Tax Return is Necessary?
There are several different types of international information reporting forms the taxpayer may have to file in order to disclose foreign assets, accounts and investments. Many of these forms, such as Form 3520 and FBAR are required to be filed even if the taxpayer is not required to file a tax return in the same year — because maybe for example, they are below the threshold for having to file a tax return. Unlike these other forms, FATCA Form 8938 is generally not required to be filed by US Persons unless they are also required to file a tax return in that year. Thus, no matter what the value of the assets may be — a Taxpayer does not have to file if they do not have to file a tax return.
Below the FATCA Threshold
There are various different threshold requirements for having to file Form 8938 in order to report FATCA assets. Depending on whether the filer resides in the United States or abroad — and whether or not they are filing joint tax returns (MFJ) or as Married Filing Separate (MFS) will impact whether or not they have to file the Form 8938. For example, a single filer who resides in the United States may have to file the IRS Form 8938 to report when the total maximum value of their foreign accounts/assets exceeds $50,000 on the last day of the year. Conversely, if that same taxpayer was married and living overseas and filing married filing joint — the minimum threshold for filing is $400,000.
Domestic Investment Funds/Pension with Foreign Assets
One common exception to FATCA Form 8938 applies when a US person may own US mutual funds, investment funds or other domestic pension in which the investment contains foreign assets that would otherwise be reportable if the same fund was held direct. In other words, even if the foreign asset is the type of asset that would otherwise have to be reported for FATCA, if the asset is held within a domestic mutual fund — then it may not have to be reported.
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