Foreign Bank/Asset Reporting (FBAR/FATCA)

Service description

U.S. taxpayers who hold foreign bank accounts or certain foreign financial assets may have reporting obligations. (i) U.S. persons and entities with financial interest in or signature authority over foreign financial accounts exceeding a certain value (e.g. $10,000) must submit a Report of Foreign Bank and Financial Accounts (FBAR) on FinCen Form 114, filed with the Department of Treasury's Financial Crimes Enforcement Network (FinCen). This is an annual obligation; filing deadline is April 15, with a 6-month automatic extension to Oct 15 available. (ii) Specified domestic entities include certain domestic corporations, partnerships, and trusts that have an interest in specified foreign financial assets and the total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the tax year must file a Foreign Account Tax Compliance Act (FATCA) report on IRS Form 8938. This is an annual obligation; form is filed with federal income tax return.

Common industries

Any individual or business with foreign financial accounts, offshore assets, or expatriate employees abroad.

ROI

Compliance avoids the significant penalties that can apply to unreported foreign accounts, and lets you resolve any past non-filing on your own terms rather than after an IRS inquiry.

Benefit

Report foreign financial accounts and assets to stay compliant with FBAR and FATCA, and address any past non-filing.

Why get it

Undisclosed foreign accounts and assets carry some of the steepest civil and criminal penalties in the tax code, and voluntary compliance now is far cheaper than being found by an IRS or FinCEN examination later.

When you benefit

Both filings are annual. The FBAR is due April 15, with an automatic extension to October 15; Form 8938 is filed with the income tax return on the same schedule.

What it costs

Typically a flat fee per filer, scaled to the number of foreign accounts or assets being reported.

When you pay

Usually billed once the accounts and assets in scope are known, since that's what drives the amount of work. A catch-up filing for multiple past years is priced and billed separately from the current year's report.

Other costs

Resolving unfiled prior years, if any, can mean added fees for a voluntary disclosure or streamlined filing procedure, on top of the current year's compliance work.

Risks to know

Missing the FBAR can draw a civil penalty that grows sharply if the failure is found to be willful, on top of any FATCA penalty under Form 8938. Both apply per account or asset, per year, so a multi-year, multi-account gap compounds quickly.

When risks arise

Penalty exposure accrues year by year for every reporting year missed, and the clock doesn't reset just because a later year's filing is current. Because the FBAR is filed separately from the income tax return, it is the easiest of the two to overlook even when the rest of the return is complete and on time.

The process

The preparer inventories the foreign accounts and assets in scope, determines whether the FBAR threshold, the FATCA threshold, or both are met, and calculates the peak or year-end values each requires. It prepares and files the FBAR directly with FinCEN and attaches Form 8938 to the federal income tax return. If prior years were never reported, the preparer discusses which IRS disclosure procedure fits before filing anything late.

Your commitment

The business or individual identifies every foreign account and financial asset it holds or has signature authority over, including the highest balance or value reached during the year, and shares account statements or year-end summaries for each one. It should flag any account or asset from a prior year that was never reported.

Documents to gather

• List of foreign financial accounts, with account numbers and the institution's name and address
• Year-end and highest-balance statements for each foreign account
• Records of any foreign financial assets reportable under FATCA, such as foreign stock or fund holdings
• Prior-year FBAR and Form 8938 filings, if any

Helpful reading

• Mitigating risk of large FBAR and international tax claims — Journal of Accountancy
• Summary of FATCA reporting for U.S. taxpayers — Internal Revenue Service (IRS)

Further research

• 31 U.S. Code § 5314 — Records and reports on foreign financial agency transactions
• 26 U.S. Code § 6038D — Information with respect to foreign financial assets (FATCA, Form 8938)
• Report of Foreign Bank and Financial Accounts (FBAR) — filing threshold and deadline