In case you have an account in any foreign bank or have any signature authority at any foreign bank, you would be needed to report the account annually to US Department of Treasury. Note that the foreign bank account is not only limited to any specific monetary transaction account. The account also includes mutual funds, savings accounts, brokerage accounts and other types of foreign financial assets. Under the Act of Bank Secrecy, each person belonging to US should file a Foreign Bank Accounts Report commonly abbreviated as FBAR. On the other hand, if the combined total of your foreign financial accounts is at least $10K, then you have to file Form 114.
Form 114, also known as FinCEN, is a standard requirement for all US residents and citizens who have foreign bank accounts. If you fail to file this form, it may result in stiff penalties which also include financial penalty and criminal prosecution.
Alongside filing the FinCEN Form 114, you are needed to file FATCA Form 8938. However, you should meet the below-mentioned conditions to file FATCA.
- You stay in the United States and you are filling a tax return as a single individual. You would also be required to fill this form in case you have foreign assets with an aggregate value of $50K as foreign assets and $75K during any day of the year.
- You stay in the USA and you are filling a joint return with your spouse. Moreover, you would be required to fill this form if you have foreign assets aggregating $100K at the end of the financial year. In case it exceeds $150K at any point of time, you would be required to fill this form.
- You would be required to fill this form if you are an US expat living abroad and you are filling a tax return as an individual. Also, if you have foreign assets aggregating $200K on the final day of the financial year, you would be required to fill this form. Furthermore, if your foreign assets have reached $300K at any point of the year, filling this form is necessary.
- If you are an US expat living abroad and want to file a joint return with your spouse and you have major foreign assets aggregating $400K or the value of your assets have reached $600K at any point of the financial year.
- To file FATCA Form 8938, the term of foreign assets comprises more than your financial accounts. You are liable to report all losses and gains that are incurred from your asssets which also includes foreign stock and hedge funds.
Unlike the FinCEN Form 114, the FATCA Form 8938 is filed with the US tax return.