US taxpayers with foreign bank accounts or other foreign financial assets may need to deal with the reporting requirements of FBAR and FATCA. Although these requirements often overlap, they are not interchangeable. A taxpayer may need to file either an FBAR or Form 8938 under FATCA, or both, depending on the circumstances. Understanding the difference between FBAR and FATCA is important because filing one form does not satisfy the obligation to file the other.
FBAR is the Report of Foreign Bank and Financial Accounts, officially FinCen Form 114. It is not filed with the annual tax return but filed separately. A US taxpayer must file an FBAR when the taxpayer has a financial interest or signature authority in at least one foreign account and the combined value of all foreign accounts exceeds $10,000 at any time during the year. The FBAR is due by April 15, an automatic extension for filing makes the filing deadline October 15.
FATCA is the Foreign Account Tax Compliance Act. FATCA reporting is completed by filing Form 8938 as part of a taxpayer’s annual federal income tax return. For single taxpayers residing in the US, Form 8938 is required when foreign financial assets exceed $50,000 on the last day of the year or $75,000 at any time during the year. For married taxpayers filing jointly residing in the US, Form 8938 is required when foreign financial assets exceed $100,000 on the last day of the year or $150,000 at any time during the year.
For taxpayers living abroad the threshold to file is higher. For a single taxpayer, it is $200,000 on the last day of the year, and $300,000 at any point during the year. For married filing jointly taxpayers, it is $400,000 on the last day of the year, and $600,000 during the year.
A major difference between FATCA and FBAR is the type of assets that each cover. FBAR primarily covers accounts maintained by financial institutions, such as bank accounts, brokerage accounts, and securities accounts. FATCA covers a broader range of assets. FATCA covers bank accounts like FBAR does, but it also covers securities held outside of a financial institution, interests in foreign corporations or partnerships, and foreign pensions.
One further difference is that FBAR requires accounts where an individual has signature authority to be disclosed but FATCA does not require disclosure if an individual only has signature authority and does not have an ownership interest.
So, the main difference in FBAR and FATCA reporting is that the FBAR threshold is $10,000, while the FATCA threshold is at least $50,000. But other important differences are: (1) FATCA reporting is filed with your annual tax return while FBAR is filed separately in October, (2) mere signature authority can trigger FBAR reporting but not FATCA reporting, and (3) FATCA covers a broader range of assets than FBAR does.
Given the complexities of FBAR and FATCA, it is important to review your reporting obligations with a tax professional annually.
At Safeguard Law, PLLC, our team of experienced tax attorneys specializes in helping our clients navigate issues such as this. Contact us today to schedule a consultation! Our main business line is (202) 505-1741.