The Internal Revenue Service saw all the fun that the FBAR was having and said “Ooh we want one of those, too!”  So the IRS created the FATCA, Form 8938.  The Form 8938 goes into your individual return each year and is similar to the FBAR.  The FATCA is actually administered by the IRS so it has a familiar feel to it, but the content of the form is very similar to the FBAR and unfortunately so are the penalties.  While some of the administration is more intuitive since it is an IRS form, the requirements of who should file and how to report everything is significantly more complex.

The form is due with your return, which means an extension for your 1040 is an extension for the FATCA.  You can also file amended returns to include or change the information on the FATCA just like you would amend a return to include some interest income that inadvertently got missed.  That’s it for the good news; the rest is rather unpleasant.

The FATCA started in 2011 for individuals and now it has also taken affect for business returns in 2012.  There is no tax due on a FATCA, but the penalty for someone who fails to properly file a FATCA is $10,000 per year.  There are some other related forms about foreign accounts and investments that also carry $10,000 penalties for not filing.  The penalties can certainly add up in a hurry at $10,000 per form per year.  Owning interests in foreign companies or foreign trusts will hit you with a few more complex forms, but for now let’s focus on the FATCA.

On the surface it seems like the FATCA is the less intrusive because the base level exemptions are higher.  Single people living in the United States only need to file the form if the assets exceed $50,000 on the last day of the year or $75,000 at some point during the year.  Higher exemptions exist for married citizens or citizens that are living abroad.  Given the stiff penalties and increased attention these forms have, it might be wise to file the form even if you are not required to do so.

Foreign financial accounts include bank accounts, stock in foreign companies, notes issued by a foreign person, foreign derivatives or investment options, and investment accounts held in a foreign country.  The list of requirements and complexities goes on and on…  I would say if you do anything other than take a vacation to a foreign country you should definitely dig into the details and see if filing a FATCA is required.  Better safe than sorry on this one.