Question: Jim and Sarah are U.S. citizens who reside in the United States and file a joint federal income tax return. They have $5,000 in foreign bank accounts. Jim and Sarah also have $200,000 in foreign stocks issued by a foreign corporation, which is directly held be the couple and is not in a U.S. financial institution.
Could Jim and Sarah have a Form 8938, Statement of Specified Foreign Financial Assets, reporting requirement, but not a Report of Foreign Bank and Financial Accounts (FBAR) filing requirement using FinCEN Form 114?
Answer: Yes, a taxpayer could have a Form 8938, filing requirement but not an FBAR filing requirement. This is due to differences in the threshold requirements and types of reportable assets for each form. A taxpayer might have foreign assets that meet the Form 8938 filing thresholds (e.g., foreign stock held directly) but do not qualify as foreign financial accounts. Since FBAR only covers foreign financial accounts, these types of foreign assets would not trigger an FBAR filing.
Types of reportable assets:
a. Form 8938: Covers a broader range of foreign financial assets, including interests in foreign entities and certain foreign non-account assets like foreign stocks held directly.
b. FinCEN 114 (FBAR): Limited to foreign financial accounts, such as bank accounts, brokerage accounts and similar types of accounts with a financial institution.
Threshold differences:
a. Form 8938: For specified individuals, the thresholds are as follows: If an unmarried or married filing separate (MFS) taxpayer living in the U.S. has assets over $50,000 on the last day of the tax year, or $75,000 at any time during the tax year, they must file. For married taxpayers filing jointly (MFJ), these limits are $100,000 on the last day of the tax year or $150,000 at any time during the tax year. These amounts increase for U.S. citizens/resident aliens living abroad. For unmarried or MFS taxpayers, the threshold is $200,000 on the last day of the tax year or $300,000 at any time during the tax year. For MFJ taxpayers, the thresholds are $400,000 on the last day of the tax year and $600,000 at any time during the tax year.
b. FinCEN Form 114 (FBAR): Required if the aggregate value of foreign financial accounts exceeds $10,000 at any point during the calendar year. There are no differences in thresholds whether the taxpayer is married filing a joint return, married filing a separate return or an unmarried taxpayer.
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Information included in this article is accurate as of the publish date. This post is not reflective of tax law changes or IRS guidance that may have occurred after the date of publishing.