Over recent years, the US Treasury has become serious about reporting foreign financial assets, and many taxpayers are confused about exactly which assets should be reported. Many taxpayers are aware that the FBAR, now FinCEN Report 114, must be submitted to report foreign bank accounts with a combined balance above a certain threshold, but there are other related reporting requirements, which amount to much duplication.
FinCEN Form 114: Previously called Form TD F 90-22.1. This form is used for reporting foreign financial assets such as foreign bank checking and savings accounts, foreign mutual funds, some foreign retirement accounts, and some foreign life-insurance policies. Starting in 2016, it is due on April 15, and for the first time, its due date can be automatically extended by six months. It must be filed electronically.
Form 8938: This form must be attached to the individual taxpayer’s 1040. It is also used for reporting foreign financial assets like checking and savings accounts, foreign mutual funds, some foreign retirement accounts, and some foreign life-insurance policies. Also reported on this form are direct holdings of stock in foreign corporations, foreign partnership interests, and foreign hedge fund interests. The filing threshold is higher for this form and depends on the taxpayer’s filing status.
Form 8891: This form is now obsolete, but used to also be attached to the taxpayer’s 1040. This was an information return for beneficiaries of Canadian RRSPs and RRIFs. The substituted procedures depend on the taxpayer’s reporting history for these retirement accounts.
There are many other important reporting requirements, and the procedures described here are simplified for practical purposes. Given the potential for hefty fines for noncompliance, it is wise to seek competent tax advice if you think this may apply to you.