|By Melih Oztalay||
|September 3, 2014 03:50 PM EDT||
Similar, but both Form 8938 and FBAR Form 114 may be necessary
At first glance Form 8938, Statement of Specified Foreign Financial Assets, and FBAR (Foreign Bank Account) FinCEN Form 114 appear very similar. Do you need to file both to report your foreign assets?
Start with 1040
When you are preparing your Form 1040 income tax return and completing Schedule B, Interest and Ordinary Dividends, you will come to Part III where you will include where your foreign accounts are located. You are required to complete if you (a) had more than $1,500 of taxable interest or ordinary dividends; (b) had a foreign account; or (c) received a distribution from, or were a grantor of, or a transferor to, a foreign trust. If you have more than $1,500 in taxable interest and dividends, you need to answer the questions listed including Form 8938.
IRS Form 8938, Statement of Specified Foreign Financial Assets is for U.S. citizens, resident aliens of the U.S. or a nonresident alien that meets certain conditions. There are different reporting thresholds for taxpayers living in the U.S. and those taxpayers living abroad. Similarly, there are different thresholds for those that are unmarried, married filing jointly, or married filing separately. Carefully read the instructions or work closely with a tax professional. Form 8938 requires disclosure of interest, dividends, royalties, etc. from your foreign accounts and where you are reporting them on your tax return, FinCEN Report 114 does not require this information.
FinCEN Form 114
Question 7a on Form 1040 requires your response in stating whether or not you are required to file FinCEN Form 114. If you have financial interest in, signature authority, or other authority over one or more financial accounts in a foreign country and the aggregate value of the accounts exceeds $10,000 at any time during the year you must file Form 114, Report of Foreign Bank and Financial Accounts (FBAR) electronically through FinCEN’s BSA E-Filing System. This is not part of the federal tax return, but must be filed by June 30 each year.
The IRS has increased interest in offshore accounts so make sure that you follow the correct reporting procedures so that you can be compliant with the current tax laws.
About Freeman Tax Law
At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning.
Freeman Tax Law
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