2021 FBAR and FATCA Requirements: Do You Need to File?

Tax season is here again. While, for most people, this simply means preparing their state and federal tax returns, U.S. taxpayers who have offshore assets may have additional filing requirements as well. Here US International Tax Advisors explains the FBAR and FATCA filing requirements for 2021.

Who Needs to File an FBAR in 2021?

The FBAR filing requirement applies to U.S. taxpayers who own offshore financial accounts. If you owned offshore accounts with an aggregate value of more than $10,000 at any point during 2020, then you must file FinCEN Form 114, Report Foreign Bank and Financial Accounts (FBAR) by April 15, 2021.

This form is not filed with the IRS. Rather, it is filed with the Financial Crimes Enforcement Network (FinCEN). FinCEN requires all FBARs to be filed electronically in 2021 using the government’s BSA E-Filing System.

While most types of foreign financial accounts need to be disclosed, there are some exceptions. For example, at present, the FBAR filing requirement does not apply to accounts that solely hold virtual currency. However, if a taxpayer has multiple reportable offshore accounts and any of these accounts exceeds the $10,000 threshold, all reportable accounts must be disclosed to FinCEN.

Who Needs to File IRS Form 8938 in 2021?

Under the Foreign Account Tax Compliance Act (FATCA), U.S. taxpayers who own foreign financial assets (including, but not limited to, foreign financial accounts) must report these assets to the Internal Revenue Service (IRS) using IRS Form 8938. FATCA establishes two possible reporting thresholds—U.S. taxpayers must report their foreign financial assets using IRS Form 8938 if either:

• The aggregate value of the taxpayer’s reportable foreign financial assets exceeded $75,000 at any point during the 2020 tax year; or,
• The aggregate value of the taxpayer’s reportable foreign financial assets exceeded $50,000 at the end of the 2020 tax year.

Importantly, if a U.S. taxpayer is required to report foreign financial accounts under FATCA, the taxpayer must still comply with the FBAR filing requirements as well.

What are the Consequences of Failing to File an FBAR or IRS Form 8938?

U.S. taxpayers who fail to file an FBAR or IRS Form 8938 in 2021 can face steep penalties. Under the Bank Secrecy Act (BSA), FBAR noncompliance can lead to civil or criminal penalties—up to and including six-figure fines and federal imprisonment. Under FATCA, taxpayers who fail to file IRS Form 8938 can face penalties including: “[A] $10,000 failure to file penalty, an additional penalty of up to $50,000 for continued failure to file after IRS notification, and a 40 percent penalty on an understatement of tax attributable to non-disclosed assets.”

Request an Appointment with US International Tax Advisors

For more information about the FBAR and FATCA filing requirements in 2021, schedule a confidential initial consultation at US International Tax Advisors. To request an appointment with US International Tax Advisors, please call 844-796-8565 or contact us online today.