Is Form 8938 Required if I File FBAR?
One of the most confusing aspects for Taxpayers who are required to report overseas accounts can sometimes be just deciding whether or not a specific international reporting form is required to disclosure a foreign asset or not. It can get especially complicated for Taxpayers who may have several different categories of foreign assets — and therefore have to file multiple forms to report the different types of account/assets. Two of most common Forms are the FBAR (Foreign Bank and Financial Accounts, FinCEN Form 114) and FATCA (Foreign Account Tax Compliance Act aka FATCA). While there are some international assets that require both FBAR and Form 8938 to be filed for the same asset — sometimes only one of these forms will have to be filed to disclose foreign assets. Let’s take a look at some of the FBAR/Form 8938 filing and reporting requirements:
What is FBAR used to Report?
FinCEN summarizes the FBAR reporting requirement as follows:
A financial account includes, but is not limited to, a securities, brokerage, savings, demand, checking, deposit, time deposit, or other account maintained with a financial institution (or other person performing the services of a financial institution).
A financial account also includes a commodity futures or options account, an insurance policy with a cash value (such as a whole life insurance policy), an annuity policy with a cash value, and shares in a mutual fund or similar pooled fund (i.e., a fund that is available to the general public with a regular net asset value determination and regular redemptions).
Foreign Financial Account
A foreign financial account is a financial account located outside of the United States. For example, an account maintained with a branch of a United States bank that is physically located outside of the United States is a foreign financial account. An account maintained with a branch of a foreign bank that is physically located in the United States is not a foreign financial account.
What is Form 8938 used to Report?
As provided by the IRS:
Specified foreign financial assets include the following assets.
Financial accounts maintained by a foreign financial institution.
The following foreign financial assets if they are held for investment and not held in an account maintained by a financial institution.
Stock or securities issued by someone that is not a U.S. person (including stock or securities issued by a person organized under the laws of a U.S. possession).
Any interest in a foreign entity.
Any financial instrument or contract that has an issuer or counterparty that is not a U.S. person (including a financial contract issued by, or with a counterparty that is, a person organized under the laws of a U.S. possession).
Which Types of FBAR and Form 8938 Assets Overlap?
As provided by the IRS on the issue of FBAR and Form 8938:
Types of Foreign Assets and Whether They are Reportable
|Types of Foreign Assets||Form 8938, Statement of Specified Foreign Financial Assets||FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)|
|Financial (deposit and custodial) accounts held at foreign financial institutions||Yes||Yes|
|Financial account held at a foreign branch of a U.S. financial institution||No||Yes|
|Financial account held at a U.S. branch of a foreign financial institution||No||No|
|Foreign financial account for which you have signature authority||No, unless you otherwise have an interest in the account as described above||Yes, subject to exceptions|
|Foreign stock or securities held in a financial account at a foreign financial institution||The account itself is subject to reporting, but the contents of the account do not have to be separately reported||The account itself is subject to reporting, but the contents of the account do not have to be separately reported|
|Foreign stock or securities not held in a financial account||Yes||No|
|Foreign partnership interests||Yes||No|
|Indirect interests in foreign financial assets through an entity||No||Yes, if sufficient ownership or beneficial interest (i.e., a greater than 50 percent interest) in the entity. See instructions for further detail.|
|Foreign mutual funds||Yes||Yes|
|Domestic mutual fund investing in foreign stocks and securities||No||No|
|Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor||Yes, as to both foreign accounts and foreign non-account investment assets||Yes, as to foreign accounts|
|Foreign-issued life insurance or annuity contract with a cash-value||Yes||Yes|
|Foreign hedge funds and foreign private equity funds||Yes||No|
|Foreign real estate held directly||No||No|
|Foreign real estate held through a foreign entity||No, but the foreign entity itself is a specified foreign financial asset and its maximum value includes the value of the real estate||No|
|Foreign currency held directly||No||No|
|Precious Metals held directly||No||No|
|Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles||No||No|
|‘Social Security’- type program benefits provided by a foreign government||No||No|
*Note – This table is current through the publication date. Please check the instructions for each form for information regarding any future developments.
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