If you are reading this blog, chances are you are already somewhat familiar with the veritable alphabet soup of abbreviations involved in offshore account compliance. As we discussed in our April 19 post, abbreviations abound in this area of tax law.
Along with IRS, taxpayers with foreign accounts need to know, for starters, about FBAR and FATCA. With the June 30 deadline for filing the FBAR form fast approaching, taxpayers in Southern California and across the county need to be aware of what that form involves and how it relates to the new law on offshore tax evasion known as FATCA.
FBAR, of course, is the Report of Foreign Bank and Financial Accounts. It applies to accounts valued at more than $10,000 at any time during the tax year.
In technical IRS terms, the FBAR also naturally has a specific form number. That number is Form TD F 90-22.1.
The FBAR filing requirement is a well established one. But there is now a new kid on the block, as it were, concerning foreign account filing forms.
That form is Form 8938. Its longer, more descriptive name is the Statement of Specified Foreign Financial Assets.
Form 8938 has come into the picture due to a recent federal law, the Foreign Account Tax Compliance Act (FATCA). It is an ambitious, sweeping law aimed at preventing tax evasion by forcing individuals and financial institutions to be more transparent about foreign accounts.
Though FATCA has not yet been fully implemented, the complex process for doing so is well underway. For our purposes today, the point is that FATCA, like FBAR, will contain a threshold value for accounts that triggers a filing requirement. That threshold will be $50,000 for FATCA compared to $10,000 for the FBAR.
Source: IRS.gov, "Comparison of Form 8938 and FBAR Requirements"