If I File IRS Form 8938, Do I Also Need to File an FBAR?News, Offshore Account Update
Posted in on December 17, 2020
Owning foreign financial assets triggers disclosure requirements for U.S. taxpayers; and, as we discussed previously, filing FinCEN Form 114, Report Foreign Bank and Financial Accounts (FBAR), is not enough for many individuals and businesses. But, what if you file IRS Form 8938? Does this satisfy your FBAR filing requirements? Here, Maryland offshore tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, explains why filing Form 8938 alone may or may not be enough to protect you from IRS scrutiny.
Filing Form 8938 Does Not Satisfy Your FBAR Filing Requirement
If you are required to file an FBAR, filing Form 8938 does not satisfy your FBAR filing requirement. This is true even if you disclose your foreign financial accounts on Form 8938.
The reason for this is that the obligation to file Form 8938 and the obligation to file an FBAR exist under different statutes. Form 8938 covers taxpayers’ reporting obligations under the Foreign Account Tax Compliance Act (FATCA), while the FBAR is required under the Bank Secrecy Act (BSA). Additionally, while taxpayers must file Form 8938 with the Internal Revenue Service (IRS), FBARs must be filed electronically with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
If You File Form 8938, You May or May Not Need to File an FBAR
If you need to file Form 8938, this does not necessarily mean that you need to file an FBAR. However, you will want to consult with a Maryland offshore tax attorney to make sure you file an FBAR if you need to. While FATCA requires taxpayers to report all “foreign financial assets” with an aggregate value of more than $50,000, FBARs are used to disclose “foreign financial accounts” with an aggregate maximum value of $10,000 at any point during the tax year.
So, if your “foreign financial assets” are not “foreign financial accounts,” then you do not need to file an FBAR. However, if you have offshore accounts that exceed the aggregate maximum value threshold, then you must file an FBAR—and this is true regardless of whether your accounts also trigger reporting obligations under FATCA.
What Happens if I Fail to File an FBAR?
Failing to file an FBAR can lead to severe consequences—including both civil and criminal penalties. As a result, if you have failed to file an FBAR, it will be important for you to remedy the issue before the IRS discovers it.
There are two primary voluntary disclosure options available, each of which offers different benefits under different circumstances. Since filing an FBAR could trigger a review of your past filings (or lack thereof), if you believe that you may be behind on your foreign financial account disclosures, you will want to consult with an attorney to devise an appropriate strategy for moving forward.
Request an Appointment with Maryland Offshore Tax Attorney Kevin E. Thorn
If you would like more information about FATCA and FBAR compliance, or if you need help devising a strategy to remedy past FBAR filing deficiencies, we encourage you to get in touch. To schedule an appointment with Maryland offshore tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 240-235-5096, email email@example.com or contact us online today.Share This Post