FBAR & 8938 – Joint Accounts In Married Filing Separately Situations

As a taxpayer, it is essential to understand the tax obligations associated with foreign financial accounts. Two forms are used to report foreign financial accounts, the FBAR (Report of Foreign Bank and Financial Accounts) and Form 8938 (Statement of Specified Foreign Financial Assets).

FBAR refers to Treasury Form TD F 90-22.1, and it is used to notify the United States government of any foreign bank accounts that U.S. taxpayers hold or control, and which have a total value of over $10,000 at any point in the year. This form must be filed electronically by April 15th of each year, although an automatic extension is granted until October 15th.

Form 8938, on the other hand, applies specifically to foreign financial assets. It is required for individuals who hold specified foreign assets with an aggregate value of more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. The form must be filed with the taxpayer’s annual federal income tax return by the due date.

Both FBAR and Form 8938 were implemented to improve the government’s ability to identify and track funds held overseas by U.S. taxpayers. With the rise of global financial transactions and the increasing complexity of international tax laws, these forms are essential tools in detecting and preventing tax evasion.

How to report for joint accounts in Married Filing Separately (MFS) situations?

When it comes to joint accounts in MFS situations, each account holder must carefully evaluate their reporting obligations. Let’s explore the key considerations:

• Reporting Thresholds: The FBAR reporting threshold for joint accounts is determined based on the aggregate value of the account, and if it exceeds the threshold, each account holder must file a separate FBAR.
• Account Ownership: If you have a joint account with your spouse and file your taxes separately, only one spouse needs to file the FBAR. For Form 8938 filing purposes, each spouse should report half of the value in the jointly owned account.

It is important for taxpayers to understand their obligations with regard to these forms, as failure to comply can result in significant penalties. For FBAR, the penalty for non-willful violations can be as high as $10,000 per violation, while willful violations can result in penalties equal to the greater of $100,000 or 50% of the account balance. For Form 8938, penalties start at $10,000 for failure to disclose and can go as high as $60,000 for continued non-compliance after notification by the IRS.

Our tax service is equipped to help taxpayers navigate the complexities of FBAR and Form 8938 reporting requirements. With our expertise in tax compliance, we can provide accurate and timely preparation of these forms. Contact us today to learn more about how we can help you stay compliant with foreign financial account reporting requirements.