Understanding Foreign Account Tax Compliance: FBAR & FATCA

The U.S. government requires mandatory reporting of foreign financial accounts and assets, in addition to taxes on income generated from them. When filing your federal tax return, it’s crucial to determine whether you need to file the Report of Foreign Bank and Financial Accounts (FBAR) or Form 8938 under the Foreign Account Tax Compliance Act (FATCA)—or both. Non-compliance can result in hefty fines and penalties, making it essential to work with a tax professional to ensure proper reporting.

What is FBAR?

FBAR (FinCEN Form 114) is an annual filing requirement with the Financial Crimes Enforcement Network (FinCEN). It applies to U.S. citizens, resident aliens, and certain entities (trusts, estates, businesses) that own or have signature authority over foreign financial accounts exceeding $10,000 at any point in the calendar year.

•Who must file? Individuals and entities with foreign financial accounts

•Filing deadline? April 15 (automatic extension to October 15)

• Penalties? Failure to file can lead to severe monetary fines and legal consequences

FBAR is filed separately from your tax return, making it essential to track foreign holdings independently.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) requires U.S. taxpayers to report specific foreign financial assets on Form 8938, filed with their annual tax return. Unlike FBAR, FATCA applies to a broader set of taxpayers, including residents, citizens, and certain non-residents.

Key Differences Between FBAR & FATCA:

✔ FBAR applies to accounts exceeding $10,000; FATCA has higher reporting thresholds (starting at $50,000 for individuals)

✔ FBAR is filed separately with FinCEN, while FATCA is included in your tax return

✔ FBAR applies to more entities, including trusts and businesses

To avoid costly penalties, iTax Filer ensures your foreign assets are correctly reported under both FBAR and FATCA regulations. Contact us today to stay compliant and avoid unnecessary risks!