Understanding the FBAR and Form 8938 is crucial for tax pros due to the prevalence of U.S. tax residents owning assets abroad. These assets, such as foreign bank accounts and foreign securities, may trigger mandatory reporting requirements.
You need to be able to differentiate between the two forms, identify the applicable filing thresholds and stay up to date with recent legal developments.
Below, you’ll find a few of the top questions from a recent webinar on the topic and their accompanying answers. If you choose to attend the on-demand version of this webinar, you’ll have access to the full recording and the entire list of Q&As.
Q: Do I need to report stock owned in a foreign corporation?
A: Foreign stock not held in a financial account is reportable on Form 8938, but it is not reportable on the FBAR. On the other hand, if the foreign stock is held in a foreign financial account, the account itself is reportable on Form 8938 and the FBAR, but the contents of the account do not have to be separately reported.
Q: If a client owns rental real estate in a foreign country, is it considered a foreign financial asset?
A: No. If they own the foreign real estate directly, it isn’t reportable on the FBAR or Form 8938, even if it is rental property.
Q: If a client owns foreign real estate (e.g., main home or vacation home) or foreign personal property (e.g., cars or collectibles) that are used personally or held for investment, do I need to report them?
A: No. Foreign real estate and foreign personal property that are held directly are not reportable on the FBAR or Form 8938. It doesn’t matter how the property is used or whether it is held for investment.
Q: If a foreign life insurance policy does not have a cash value, is it reportable?
A: No. Only foreign-issued life insurance or annuity contracts with a cash value (such as a whole life insurance policy) are reportable on the FBAR and Form 8938.
To learn more about navigating fixed assets and depreciation, you can watch our on-demand webinar. NATP members can attend for free, depending on membership level! If you’re not an NATP member and want to learn more, join our completely free 30-day trial at natptax.com/explore.
