Foreign Reporting Forms U.S. FBAR & FATCA

Welcome to today’s webinar. My name is Rohan Badkar and in today’s webinar I will be covering foreign reporting forms U.S. FBAR and Form 8938. In today’s webinar, we will discuss:

– What is Form 8938 (FATCA)
– What is Foreign Bank Account Reporting (FBAR)
– Difference between FBAR and Form 8938
– Reportable Foreign Assets
– Examples
– Take Away Information

Let’s get started, what is form 8939. FATCA, also known as form 8938 is a tax law that compels U.S. citizens at home and abroad to file annual reports on any foreign account holdings. The purpose of FATCA is to prevent US persons from using banks and other financial institutions outside and park their wealth outside their country to avoid US taxation on income generated from such wealth.

To make things a little easier for all you, FATCA form 8938 is “Information Form” that we provide to IRS. But when I say Information form still you need report summary of tax items such as Interest, Dividend and Capital Gain income information on the first page of the form. Also, it does not matter if you physically reside overseas or in the US: if you hold financial assets that meet certain thresholds with an institution outside of the United States, you must disclose your assets to the IRS.

Moving on, what is FBAR? The Report of Foreign Bank and Financial Accounts (114) must be filed by any United States person who:

• Has a financial interest in or;
• Signature authority or;
• Other authority over any financial account in a foreign country

If the aggregate value of these accounts exceed $10,000 at any time during the calendar year. As I have explained previously about The Foreign Account Tax Compliance Act (FATCA, or Form 8938) and now the Foreign Bank Account Reports (FBAR, or Form 114) are, conceptually, works in the same line of motor, with an aim to levy certain taxes on U.S. citizens and entities with substantial overseas holdings.

The FBAR is considered by the IRS as a tool to help the US government to identify or trace funds used for unreported income maintained or generated abroad.

It’s important to note that Form 8938 should not be confused with FBAR (Report of Foreign Bank and Financial Accounts), which must be filed electronically, and is an entirely separate matter from Form 8938.

Note, that Form 8938 should not be confused with FBAR which must be electronically filed.

Now let’s compare Form 8938 & FBAR:

Wondering what foreign assets are reportable?

There are exemptions to take note of. Certain types of accounts, including most CRA registered plans are exempt included:

– Registered Retirement Savings Plans (RRSPs)
– Registered Retirement Income Funds (RRIFs)
– Registered Education Savings Plans (RESPs)
– Registered Pension Plans (RPPs)
– Pooled Registered Pension Plans (PRPPs)
– Tax Free Savings Accounts (TFSAs)

Now, we will go through an example. Bob is a U.S. citizen living in the U.S. with a filing status as Single. Bob is holding a foreign savings account worth $20,000 USD and a foreign brokerage account worth $31,000 USD. In this case, is Bob required to file FBAR? The answer is yes, as the account meets $10,000 reporting threshold. Also, is Bob required to file FATCA? The answer is yes, as the account meets $50,000 reporting threshold.

We have another example for a U.S. Citizen living outside the U.S. Rick is a U.S. Citizen living in Canada, with a filing status as Single. Rick is holding a foreign savings account worth $20,000 USD and a foreign brokerage account worth $31,000 USD. In this case, Rick is required to file FBAR as his account meets the $10,000 reporting threshold. He is not required to file FATCA as the account does not meet $200,000 USD.

I suggest to all my listeners to get in touch with Madan Chartered Accountant, a tax professional corporation to help you with your foreign reporting form needs. Thank you for attending our webinar!

ABOUT THE AUTHOR

ALLAN MADAN

CPA, CA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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