90-22.1 (fbar) vs. form 8938 reporting comparison

Foreign Asset Reporting

Scott Usher, MST, CPAMay 2012

Foreign Asset Reporting• Foreign financial assets– FBAR (Report of Foreign Bank and Financial

Accounts)– IRS Form 8938

• Other foreign assets

U.S. Reporting Requirements for Foreign Financial Assets

Quiz QuestionsFinancial Asset FBAR 8938

Quiz QuestionsFinancial Asset FBAR 8938Financial account in foreign financial institution


Y Y


Y Y

Financial account in foreign branch of US financial institution


Y Y


Y N


Y Y


Y N

Financial account in US branch of foreign financial institution


Y Y


Y N


N N


Y Y


Y N


N N

Foreign mutual funds


Y Y


Y N


N N

Foreign mutual funds Y Y


Y Y


Y N


N N

Foreign mutual funds Y YForeign partnership interest


Y Y


Y N


N N

Foreign mutual funds Y YForeign partnership interest N Y


Y Y


Y N


N N

Foreign mutual funds Y YForeign partnership interest N YForeign real estate held in a foreign entity


Y Y


Y N


N N

Foreign mutual funds Y YForeign partnership interest N YForeign real estate held in a foreign entity N N

Generally, Which Assets Are Reportable?FBAR IRS Form 8938Foreign accounts maintained in a foreign bank or financial institution—including checking, savings, demand deposit and time deposit accounts, securities and brokerage accounts—commodity and futures accounts, shares in mutual funds or similar pooled funds, funds with publicly available shares that have regular net asset value determinations and regular redemptions, insurance policies and annuities with a cash value.

Specified foreign financial assets, including foreign accounts maintained by a foreign financial institution, other foreign financial assets not in accounts maintained by a foreign financial institution—including stock or securities not issued by a U.S. person, an interest in a foreign entity, and a foreign contract or other financial instrument with an issuer or counterparty that is not a U.S. person—and an interest in a foreign estate or trust, assuming you know or have reason to know of your interest based on readily available information or a past distribution

What Must You Report?FBAR IRS Form 8938Maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets

Maximum value of financial accounts maintained by a financial institution that is physically present in a foreign country

What Entities Are Subject?FBAR IRS Form 8938U.S. person with a financial interest in, or signature or other authority over, one or more reportable foreign financial accounts and meets the reporting threshold

U.S. persons include U.S. citizens, residents aliens, trusts, estates and domestic entities

“U.S.” includes U.S. territories

Specific individuals who are required to file an income tax return and who have an interest in one or more financial accounts and meet the reporting threshold

Specific individuals include U.S. citizens, residents, and certain nonresident aliens. Entities are excluded.

“U.S.” does not include U.S. territories

What Establishes a Filing Requirement?FBAR IRS Form 8938Financial Interest You are the owner of record or holder of legal title. Or the owner of record or holder of legal title is your agent or representative. Or you have a sufficient interest in an entity that is the owner of record or holder of legal title.

Signature Authority You have authority to control disposition of account assets by direct communication with the financial institution that maintains the account.

Your tax return reports/includes any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or asset

What Are The Reporting Thresholds?FBAR IRS Form 8938Aggregate value of $10,000 or more at any point during the calendar year

$50,000 on the last day of the tax year or $75,000 at any point during the tax year

There are higher thresholds for married individuals filing jointly and persons who live overseas

What Are The Filing Deadlines?FBAR IRS Form 8938Sent to U.S. Treasury at Michigan address, and received by June 30

Filed with the federal income tax return, even if the return is extended

What If You’re Not In Compliance?FBAR Penalties IRS Form 8938

PenaltiesNon-willful violation: up to $10,000 per account, per year

Willful violation: greater of $100,000 per violation or 50% of account balance

Possible criminal penalties

Offshore voluntary disclosure program

$10,000 failure to file $10,000 per month after IRS notifies up to $50,000

Possible criminal penalties

Are There Other Reporting Requirements?Yes, generally for U.S. taxpayers who own or control any of a range of other foreign assets

U.S. Reporting Requirements for Other Foreign Assets

Other Reporting for U.S. Taxpayers• U.S. owner of a foreign trust: IRS

Form 3520• U.S. owner of a Canadian

Registered Retirement Savings Plan (RRSP) IRS Form 8891

• U.S. owner, officer or director of a controlled foreign corporation (CFC): IRS Form 5471

Other Reporting for U.S. Taxpayers• U.S. owner of a passive foreign

investment company: IRS Form 8621

• U.S. owner of a foreign partnership: IRS Form 8865

Questions?

Scott Usher, MST, CPASenior ManagerBader Martin, [email protected]

90-22.1 (fbar) vs. form 8938 reporting comparison

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