Why International Reporting Matters
Individuals and businesses looking for an international tax lawyer in Lexington, Massachusetts can turn to Wakrim Law Firm for guidance on U.S. international tax reporting and compliance matters. Depending on a taxpayer’s status, the nature and value of foreign financial assets or accounts, and applicable reporting thresholds, federal requirements may include Form 8938 under FATCA, the Foreign Bank and Financial Accounts Report (FBAR), or other international information returns. We help clients identify potentially applicable requirements, review reporting obligations, address compliance concerns, and evaluate appropriate next steps based on their circumstances.
Who Must File and What Forms Apply
FBAR (FinCEN Form 114): U.S. persons may have an FBAR filing requirement if they have a financial interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year.Form 8938: Certain taxpayers may need to report specified foreign financial assets when the applicable reporting threshold is exceeded. The threshold varies based on factors such as filing status and whether the taxpayer lives in the United States or abroad.Form 5471: Certain U.S. persons with specified ownership or other interests in foreign corporations may have information-reporting obligations involving Form 5471.Forms 8865 and 8858: Certain U.S. persons involved with foreign partnerships may need Form 8865, while certain U.S. persons owning foreign disregarded entities or operating foreign branches may have Form 8858 obligations.Forms 3520 and 3520-A: Form 3520 may apply to certain transactions involving foreign trusts or the receipt of certain foreign gifts or bequests. Form 3520-A generally concerns a foreign trust with a U.S. owner.Form 5472:Certain 25% foreign-owned U.S. corporations and certain foreign corporations engaged in a U.S. trade or business may have Form 5472 reporting obligations for reportable transactions.
Key Reporting Regimes
FATCA (Foreign Account Tax Compliance Act)
FATCA may require certain U.S. taxpayers to report specified foreign financial assets on Form 8938 when applicable reporting thresholds are exceeded. FATCA also imposes separate reporting obligations on certain foreign financial institutions and other foreign entities regarding accounts or assets connected to U.S. persons.
FBAR (Foreign Bank Account Report)
The FBAR is a separate reporting requirement administered through FinCEN. A U.S. person generally must file an FBAR when the person has a financial interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeds $10,000 at any time during the calendar year. The FBAR is filed separately from the federal income tax return.
Form 8938 vs. FBAR
Form 8938 and the FBAR are separate reporting requirements and one filing does not automatically replace the other.
Form 8938 generally applies to specified foreign financial assets and uses reporting thresholds that vary according to the taxpayer’s circumstances.
Form 8938 is generally filed with the taxpayer’s annual federal tax return, while the FBAR is filed separately with FinCEN.
Depending on the assets, accounts, values, and taxpayer circumstances involved, a person may be required to file one form, both forms, or neither.
Our Compliance & Planning Process
Initial Assessment: Review the client’s tax residency, foreign accounts and assets, ownership interests, relevant transactions, and prior filing history.Reporting Analysis: Identify potentially applicable federal international information-reporting requirements based on the client’s circumstances, including FBAR, Form 8938, and other relevant international forms when applicable.Documentation Review: Organize account statements, ownership records, transaction documents, and other information needed to evaluate reporting obligations and prepare accurate disclosures.Preparation and Coordination: Assist with the preparation and review of applicable international tax disclosures and coordinate with accountants or other tax professionals when appropriate.Filing and Follow-Up: Help clients understand applicable filing procedures and deadlines and address IRS or FinCEN correspondence or compliance concerns when representation is appropriate.
For official guidance comparing Form 8938 and FBAR reporting requirements, visit the Internal Revenue Service (IRS).
For official information about FBAR filing requirements, visit the Financial Crimes Enforcement Network (FinCEN).
Frequently Asked Questions
Q: Do I need to file both Form 8938 and an FBAR?
Possibly. Form 8938 and the FBAR are separate reporting requirements with different rules, thresholds, and filing procedures. Depending on the taxpayer’s circumstances and the foreign assets or accounts involved, a person may need to file one form, both forms, or neither.
Q: What is the FBAR reporting threshold?
A U.S. person generally must file an FBAR if the aggregate value of foreign financial accounts over which the person has a financial interest or signature or other authority exceeds $10,000 at any time during the calendar year.
Q: What should I do if I may have missed an international reporting requirement?
Do not assume that the same corrective procedure applies in every case. The appropriate response depends on the form involved, the filing history, the reason for the omission, and other facts. A review of the circumstances can help determine which compliance options may be available before additional filings are made.
Q: Do foreign gifts have to be reported to the IRS?
Certain large gifts or bequests received from foreign persons may trigger a Form 3520 information-reporting requirement. Whether a filing is required depends on the source, amount, and circumstances of the transfer.
Q: Does owning a foreign company automatically require Form 5471?
Not automatically. Form 5471 applies to certain U.S. persons who meet specified ownership, officer, director, shareholder, or other relationship requirements involving certain foreign corporations. The filing obligation depends on the taxpayer’s particular relationship with the foreign corporation.
Speak With an International Tax Attorney
If you have questions about foreign asset reporting, FBAR, FATCA, or other U.S. international tax compliance matters, contact Wakrim Law Firm to review your circumstances and possible next steps.