Foreign Financial Account & Asset Reporting...

The Foreign Bank Account Report (FBAR) - FinCEN Form 114
And Form 8938 - Statement of Foreign Financial Assets (FATCA)

The FBAR - Foreign Bank Account Report

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Any person or entity subject to the jurisdiction of the United States (including individuals, corporations, partnerships, trusts, and estates) having a financial interest in, or signature or other authority over, bank accounts, securities, or other financial accounts all together having a value exceeding $10,000 in a foreign country shall report such a relationship.

With limited exceptions, filing requirements also apply to taxpayers that have direct or indirect control over a foreign or domestic entity with foreign financial accounts, even if the taxpayer does not have foreign account(s). Failure to disclose the required information to the U.S. Department of the Treasury may result in substantial civil and/or criminal penalties. To understand the seriousness of FBAR violations, whether non-willful or willful, we recommend reading about recent court cases and indictments in connection with this filing requirement, here.

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The U.S. Treasury keeps records going back six years, therefore, ensure that you are FBAR compliant for the past six years!

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A United States person includes a citizen of the United States, a Green Card Holder, and a resident of the United States under the substantial presence test. 

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Examples of FBAR reportable financial accounts/assets include but are not limited to the following:

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• ALL financial accounts, including giro, savings/checking and investment accounts (Depot), that you own alone or jointly with another including non-U.S. persons. Also, PayPal accounts, credit/debit cards and safe deposit box with a cash balance are FBAR reportable accounts. 

• Any of the above accounts owned by another person even if they were not a U.S. person, but on which you had power of attorney or signature authority (e.g. Vollmacht) such as your spouse's, parent's or children's financial accounts - whether partly or solely.

• If a U.S. person sets up (or arranges for) a financial account outside the United States in another person's name, and does not have direct access to the account but it is funded and maintained for the U.S. person's benefit, that account would be an FBAR reportable account for the beneficial U.S. owner.

• A U.S. person who is a majority owner of a foreign entity (e.g., Corporation, Partnership, Trust), will be deemed to own the financial accounts of the foreign entity and thereby required to report the foreign financial accounts on their personal FBAR. 

• Employer pension plans (but not national pensions).

• Private pension or life insurance contracts with buy-back value.

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*in all cases, 100% of the highest account balance or value is to be declared on the FBAR, even if owned jointly with another person - that is irrespective of whether the joint owner is a U.S. person or not (same for power of attorney accounts). A good approximate for the highest balance will be accepted.

*minor U.S. citizens or Green Card holders and other resident aliens have the same filing obligations as adults. Parents or Guardians are responsible for filing the FBARs of their children/ward. 

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For further details about the FBAR filing requirement, please refer to the comprehensive FBAR guide linked below.

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The FBAR may only be electronically filed and is due by April 15 every year. Below are some useful links including FinCEN's E-file portal, guides for completing the FBAR and exchange rates:

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• Download the latest FBAR fillable form and submit it here.

• For further information about the FBAR, click here. 

• For Euro/dollar exchange rates from 2008 to 2023, click here.

• For the FinCEN's Comprehensive FBAR Line Item Filing Instructions, click here.

• For information regarding digital assets and FBAR reporting, click here.

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*Other Exchange Rates: the FBAR instructions require FBAR filers to use the Treasury Reporting Rates of Exchange on the last day of the calendar year.

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If you would like your FBAR(s) professionally prepared, please let us know and we will provide you with a worksheet to help you organize your data.

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Form 8938 - Statement of Specified Foreign Financial Assets

Certain Clients need to file Form 8938 (the FATCA form) with their Federal tax return. Form 8938 may look similar to the FBAR, however it does not replace the FBAR and it has a different purpose to the FBAR. It carries severe non-compliance penalties similar to the FBAR for noncompliance and when incomplete. 

Form 8938 is required when the value of a U.S. person's specified foreign financial assets exceeded certain dollar thresholds at the end of the year or during, according to their filing status and whether they live in the United States or outside. Foreign Financial Assets typically include ALL items on your FBAR as well as interests in foreign entities/organizations such as the German GmbH, GbR, Trusts and Stiftungs/Foundations. Please see the charts below to determine whether the form applies to you. 

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Unlike the FBAR, the form 8938 is a 'part' of the federal tax return and when not attached when required, the federal tax return will not be considered filed, even if submitted to the IRS, thereby exposing you to an indefinite statute of limitations. For this reason as well, it is very important to file the form when required. As the form is part of a federal tax return, U.S. Tax Solutions GmbH will prepare it for you as part of your tax return when it is required. For a comparison of the FBAR and Form 8938 filing requirements, click here.