Foreign Bank Accounts Regulations Part III

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In my earlier posts, Part I- here and Part II-here, we explored staying in compliance for FBAR regulations and the Foreign Account Tax Compliance Act (FATCA). We saw that all US Taxpayers who had foreign bank accounts more than $10,000 at any time during the year had to file Form TD F 90-22.1. 

In this post let's look at the new Form 8938, Statement of Specified Foreign Financial Assets. This form was introduced by the IRS after passing the FATCA in 2010. For those to whom the rules would be applicable, would have filed this form for the first time with their 2011 tax return. In IRS-speak, "Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return.  Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad." Remember this Form has to be filed along with your tax return. 

I. Who Must File?:  You are a "specified" individual if you are:

  • A US Citizen
  • A resident alien for any part of the Tax Year.
  • A non-resident alien who makes an election to be treated as a resident alien for purposes of filing a joint return OR who is a bonafide resident of American Samoa or Puerto Rico. 

II. When Must You File?: If you are a specified individual AND a you have an interest in a specified foreign financial asset, which is:

  • Any financial account maintained by a foreign financial institution
  • Other foreign financial assets held for investment that are NOT in an account maintained by a US or Foreign Financial Institution, namely: 
  1. Stock or Securities issued by someone who is not a US person
  2. ANY interest in a foreign entity, AND
  3. Any financial instrument or contract that has an issuer who is not a US person. 
To interpret the legalese, the IRS now considers not only your foreign bank accounts as reportable but also any investments in entities that are foreign. There are reporting thresholds that apply to these financial assets, which depend on your filing status and where you live during the year. 

III. In addition to I and II above:  You are required to file Form 8938 if your specified foreign financial assets (SFFA) is MORE than the reporting threshold that applies to you: 
  • Unmarried Taxpayer Living in the US: Total Value of SFFA >$50,000 on the last day of the year OR SFFA > $75,000 at any time during the year.
  • Married Taxpayers Filing a Joint Return, Living in the US: Total value of SFFA> $100,000 on the last day of the year or SFFA > $150,000 at any time during the year. 
  • Married Taxpayers Filing Separate Tax Returns, living in the US: Same as unmarried above. 
  • There are higher thresholds for taxpayers living abroad. 

More and more countries in the European Union are signing treaties with the US to have their financial institutions report directly to the US Govt if their account holders are US Citizens. There are other countries like India and UAE that are looking for reciprocal agreements with the US Govt. 

Please contact me or a qualified tax professional if you think any of the above would apply to you. The penalties for non-compliance are very steep. There is a $10,000 penalty for non-disclosure upto a maximum value of $60,000, criminal charges may also apply. 
There are added penalties if you had undisclosed income from these SFFA. The TD F 90-22.1 and the Form 8938 BOTH have to be filed if these thresholds apply to you.

The OVDI, that is the Offshore Voluntary Disclosure Initiative can be made use of to avoid some of the penalties. There is a lot of paper work involved with the process, so make sure you know what is required of you and (I can never stress this enough), find a tax pro who knows what he/she is doing!

As always, read my disclaimer here. Please consult a qualified tax professional for your unique tax needs. More of my contact information is on my website,


  1. I thoroughly enjoyed your post and I UNDERSTOOD it too. I am a beginner.

    My best regards!


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