FBAR vs. Form 8938: Comparing Filing Requirements

U.S. persons who hold financial assets outside of the country may have an obligation to report these assets to the federal government. This requirement often involves one of two forms: the Report of Foreign Bank and Financial Accounts, commonly known as the FBAR, and Form 8938, the Statement of Specified Foreign Financial Assets. While both relate to foreign asset reporting, they are distinct obligations with separate rules, thresholds, and filing processes.

The FBAR is a tool used by the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act, while Form 8938 is an Internal Revenue Service (IRS) document created to support the Foreign Account Tax Compliance Act (FATCA). Understanding the unique characteristics of each is important for maintaining compliance. It is not uncommon for a taxpayer to be required to file both forms in the same year, as satisfying one requirement does not excuse the other.

FBAR Filing Requirements

The obligation to file an FBAR, or FinCEN Form 114, applies to “U.S. persons.” This term is broadly defined to include U.S. citizens, resident aliens, and various legal entities such as trusts, estates, and domestic corporations or partnerships.

A U.S. person must file an FBAR if the aggregate value of all their foreign financial accounts exceeded $10,000 at any point during the calendar year. This threshold is not on a per-account basis; it is the combined maximum value of all foreign accounts that triggers the filing requirement. For example, if an individual holds $6,000 in a foreign bank account and $5,000 in a foreign brokerage account, the $11,000 aggregate value necessitates an FBAR filing.

The term “foreign financial account” encompasses more than just standard bank accounts, including securities or brokerage accounts, certain foreign retirement arrangements, and commodity futures or options accounts. It also covers insurance or annuity policies with a cash value. The FBAR rules also require reporting on accounts over which a U.S. person has signature authority, even without a direct financial interest in the account.

Form 8938 Filing Requirements

The requirement to file Form 8938, Statement of Specified Foreign Financial Assets, applies to “specified individuals.” This group includes U.S. citizens, resident aliens, and certain nonresident aliens. Unlike the FBAR, which also applies to entities, Form 8938 is primarily for individuals who have an interest in specified foreign financial assets that surpass certain thresholds.

For specified individuals living in the U.S., the requirement is triggered if the total value of assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year. For those married filing jointly, these thresholds double to $100,000 and $150,000, respectively.

For taxpayers who reside outside the United States, the thresholds are significantly higher. A single filer living abroad must file if their specified foreign financial assets exceed $200,000 on the last day of the year or $300,000 at any point during the year. For married couples filing jointly from abroad, these thresholds increase to $400,000 and $600,000.

The definition of “specified foreign financial assets” for Form 8938 is broader than the FBAR’s “foreign financial accounts.” In addition to financial accounts held at foreign institutions, it includes other assets held for investment. This can encompass stock or securities issued by a non-U.S. person, any other interest in a foreign entity, and any financial instrument or contract held for investment that has an issuer or counterparty that is not a U.S. person.

Comparing Key Differences

The difference between the forms begins with the administering agency. The FBAR is a product of the Bank Secrecy Act and is filed with the Financial Crimes Enforcement Network (FinCEN), while Form 8938 is an IRS form mandated by the Foreign Account Tax Compliance Act (FATCA) to ensure tax compliance.

The reporting triggers also differ, with the FBAR using a $10,000 aggregate value threshold for foreign financial accounts. Form 8938 employs a more complex, tiered system of thresholds based on residency and tax filing status, starting at $50,000 for U.S. residents. What needs to be reported also varies, as the FBAR is focused on “foreign financial accounts,” while Form 8938 covers a broader category of “specified foreign financial assets” like stocks and partnership interests.

Information and Filing Procedures

For the FBAR, filers must collect the name and address of each foreign financial institution, the account number, and the maximum value of each account during the calendar year. This maximum value must be converted to U.S. dollars using the Treasury’s official exchange rate for the last day of the calendar year.

For Form 8938, the information requirements are more extensive. In addition to the details required for financial accounts, a filer must gather information on other assets, such as the name and address of a foreign stock issuer. The form requires reporting the value of these assets, and if an asset is not a financial account, the filer must provide details to determine its fair market value.

The FBAR is filed electronically through the BSA E-Filing System website, which is managed by FinCEN. The deadline for the FBAR is April 15, but an automatic extension to October 15 is granted without needing to file a request.

In contrast, a completed Form 8938 is attached directly to the filer’s annual income tax return and submitted to the IRS. The due date for Form 8938 aligns with the income tax return deadline, which is April 15, or October 15 if a tax filing extension is requested.

Penalties for Non-Compliance

Failing to file these forms, or filing them inaccurately, can lead to substantial penalties. These penalties differ for each form and depend on whether the violation is deemed non-willful or willful.

For the FBAR, a non-willful failure to file can result in a civil penalty of up to $16,536 per violation. If the violation is found to be willful, the civil penalty can be the greater of $165,353 or 50 percent of the total balance in the unreported foreign accounts. In cases of willfulness, the government may also pursue criminal penalties.

A failure to file Form 8938 can result in an initial penalty of $10,000. If the failure continues for more than 90 days after the IRS notifies the taxpayer, an additional penalty of $10,000 is assessed for each 30-day period that the failure continues, up to a maximum of $50,000.

An accuracy-related penalty may also apply if an underpayment of tax is attributable to an undisclosed foreign financial asset, which is 40 percent of the portion of the tax underpayment. These penalties can be applied in addition to any penalties assessed for FBAR violations, meaning a taxpayer could face fines from both FinCEN and the IRS for the same assets.