When you have foreign bank accounts, you must file IRS Form 8939 and Fin Cen Form 114 annually
Posted by John T. Reed on
We do not have capital controls. They are banana republic, dictator laws, but we will get them shortly after we get hyperinflation, if we get it.
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But we do have some laws designed to harass those of us who do what capital controls would ban: hold foreign accounts. We are required to submit IRS Form 8938 (https://www.irs.gov/pub/irs-prior/i8938--2019.pdf) and Fin Cen Form 114 (https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html) annually as punishment for having foreign accounts. Having such accounts is legal, but the would-be, banana-republic dictators in the Deep State wish they were illegal. No tax is due except on interest you earn on foreign accounts.
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Form 8938 is part of your annual 1040 income tax return and is due when your return is due. Form 114 is due to the Fin Cen annually. It can only be done online. The two forms are very similar.
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There are a couple of counterintuitive aspects that I will now explain to you.
• You need to choose a “filing name.” Choose your last name then FBAR 2019.
• When you input numbers leave out the dashes and just give your five-digit ZIP.
• List yourself in Part I filer information. If you own the account jointly with your wife or another person, list her or him on line 24 of the Form 114. In my Form 114, I put the number 1 on that line. They really mean “how many joint owners other than the filer.” So I am the filer and my wife is the joint owner and there is only one joint owner.
• Line 15 maximum account value mean the max amount that was in that account at any time during the year and in USD.
• You convert the amount in the foreign currency to USD with the coefficient at https://www.irs.gov/…/yearly-average-currency-exchange-rates
• Let’s say I have $100,000 AUD in my savings account there on December 31, 2019 and that was the highest amount for the year (because of interest). The IRS table says the average conversion rate for 2019 was 1.439. To convert the $100,000 AUD to USD you divide the $100,000 by 1.439 = $69,492.70 USD.
• I have another checking account in Australia. It has about $500 AUD in it, but one day each month I have to transfer $2,000.00 AUD into the checking account momentarily then back to the savings account to avoid a $5 AUD fee. So in that account, the max balance for the year is $2,500 AUD, not the $500 it was on 12/31/19
• You can put the state in the address of yourself and the province of your Canadian bank on the form, and you must, but you cannot put the state for other countries. My bank in Sydney Australia is in the state of New South Wales, but Form 114 will not let you tell them that even though it is part of the address they want.
You only have to give the filer’s name and address once, but you have to write out all of the SSN and address of your spouse over and over for each account. Obviously, the person at Fin Cen who designed the form never filed it out. After the first joint account, the principal joint owner information should only have to be filled out if different from the previous bank account. But don’t hold your breath. It has been this way for years.
.
This takes about at hour a year for Form 114 and another hour for Form 8938. Draconian penalties if you don’t file or make a mistake ,but no tax due. Foreign cash in another country is not considered a “foreign account” according to an IRS FAQ.
.
But we do have some laws designed to harass those of us who do what capital controls would ban: hold foreign accounts. We are required to submit IRS Form 8938 (https://www.irs.gov/pub/irs-prior/i8938--2019.pdf) and Fin Cen Form 114 (https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html) annually as punishment for having foreign accounts. Having such accounts is legal, but the would-be, banana-republic dictators in the Deep State wish they were illegal. No tax is due except on interest you earn on foreign accounts.
.
Form 8938 is part of your annual 1040 income tax return and is due when your return is due. Form 114 is due to the Fin Cen annually. It can only be done online. The two forms are very similar.
.
There are a couple of counterintuitive aspects that I will now explain to you.
• You need to choose a “filing name.” Choose your last name then FBAR 2019.
• When you input numbers leave out the dashes and just give your five-digit ZIP.
• List yourself in Part I filer information. If you own the account jointly with your wife or another person, list her or him on line 24 of the Form 114. In my Form 114, I put the number 1 on that line. They really mean “how many joint owners other than the filer.” So I am the filer and my wife is the joint owner and there is only one joint owner.
• Line 15 maximum account value mean the max amount that was in that account at any time during the year and in USD.
• You convert the amount in the foreign currency to USD with the coefficient at https://www.irs.gov/…/yearly-average-currency-exchange-rates
• Let’s say I have $100,000 AUD in my savings account there on December 31, 2019 and that was the highest amount for the year (because of interest). The IRS table says the average conversion rate for 2019 was 1.439. To convert the $100,000 AUD to USD you divide the $100,000 by 1.439 = $69,492.70 USD.
• I have another checking account in Australia. It has about $500 AUD in it, but one day each month I have to transfer $2,000.00 AUD into the checking account momentarily then back to the savings account to avoid a $5 AUD fee. So in that account, the max balance for the year is $2,500 AUD, not the $500 it was on 12/31/19
• You can put the state in the address of yourself and the province of your Canadian bank on the form, and you must, but you cannot put the state for other countries. My bank in Sydney Australia is in the state of New South Wales, but Form 114 will not let you tell them that even though it is part of the address they want.
You only have to give the filer’s name and address once, but you have to write out all of the SSN and address of your spouse over and over for each account. Obviously, the person at Fin Cen who designed the form never filed it out. After the first joint account, the principal joint owner information should only have to be filled out if different from the previous bank account. But don’t hold your breath. It has been this way for years.
.
This takes about at hour a year for Form 114 and another hour for Form 8938. Draconian penalties if you don’t file or make a mistake ,but no tax due. Foreign cash in another country is not considered a “foreign account” according to an IRS FAQ.
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