FBAR and FATCA in Plain Language

Open a bank account outside the United States and, sooner or later, you will hear two acronyms: FBAR and FATCA. They are often mentioned together, and they overlap, but they are separate requirements. They go to different agencies, use different forms, and have different thresholds. Filing one does not satisfy the other.

This guide explains both in plain language, using the IRS and FinCEN pages. It is general information. The penalties for getting these wrong can be serious, so if your situation is not simple, get professional help.

FBAR: the report of foreign accounts

FBAR stands for Report of Foreign Bank and Financial Accounts. The form is FinCEN Form 114. It goes to FinCEN, the Financial Crimes Enforcement Network, which is part of the Treasury, not to the IRS with your tax return.

Who files. The IRS states that a US person must file an FBAR if they have a financial interest in, or signature authority over, foreign financial accounts, and the aggregate value of those accounts exceeded $10,000 at any time during the calendar year.

Note two things:

• Aggregate. It is the total of all your foreign accounts together, not each account separately.
• At any time. If the combined balance went above $10,000 for one day, that counts, even if you end the year far below it.

When. The FBAR is due April 15, with an automatic extension to October 15. You do not need to request the extension.

How. It is filed electronically through FinCEN's BSA E-Filing System.

FATCA and Form 8938

FATCA, the Foreign Account Tax Compliance Act, is a broader law. For individuals, the part that matters most is Form 8938, Statement of Specified Foreign Financial Assets. It is filed with your tax return to the IRS.

Who files. Form 8938 has higher thresholds, and they depend on where you live and your filing status. For taxpayers living abroad, the IRS instructions give:

• Single, or married filing separately: total specified foreign financial assets of more than $200,000 on the last day of the year, or more than $300,000 at any time during the year.
• Married filing jointly: more than $400,000 on the last day of the year, or more than $600,000 at any time during the year.

The thresholds for people living in the US are lower. Check the official instructions for the year you are filing, and for the definition of "living abroad" used for this purpose.

What counts. "Specified foreign financial assets" includes foreign financial accounts and some other foreign assets. The IRS comparison page lists what is and is not included for each form. Check it, because the two lists differ.

The differences, side by side

• Form: FBAR is FinCEN Form 114; FATCA reporting is IRS Form 8938.
• Where it goes: FBAR to FinCEN via BSA E-Filing; Form 8938 with your tax return.
• Threshold: FBAR over $10,000 aggregate at any time; Form 8938 much higher, depending on residence and filing status.
• Both may apply. If you meet both thresholds, you file both.

Common mistakes

• Thinking a small account does not count. It counts toward the aggregate.
• Thinking filing a tax return covers it. The FBAR is a separate filing.
• Forgetting joint or signature-authority accounts, such as an account you can sign on for a family member or employer. Check the official page for exceptions.
• Waiting until the deadline to find old statements. Record the highest balance of each account as you go.

Checklist

• List every foreign account you own, share or can sign on.
• Note the maximum value of each during the year.
• Add them up. Over $10,000 at any time: file the FBAR.
• Compare your foreign assets with the Form 8938 thresholds for your situation.
• Keep the statements that support each number.

For the tax return itself, see US taxes from abroad. For opening the accounts in the first place, see Bank accounts and cards abroad.

Common questions

Does a joint account with a spouse count for both of us? Each person with a financial interest may have a filing requirement. Check the official page for how joint accounts are reported.

What value do I use for an account in reais? The FBAR instructions explain which exchange rate to use. Check the official page for the year you are filing.