If you are an NRI settled in the United States of America, then knowing the difference between FATCA and FBAR is very crucial for you. When we compare FATCA and FBAR, you should also keep in mind all the FBAR and FATCA requirements that will be asked of you. We understand that these laws can be quite complicated, but with the right kind of guidance, not just from us but also from a registered attorney in the United States of America, you will be well on your way to meet all the required terms of FBAR and FATCA compliance. This will definitely help you avoid all the unnecessary legal complications and hefty penalties imposed by the US government for non-compliance.
What is FBAR?
You should know that in the United States of America, there has been a concerted effort in the past few years to uncover tax evaders who hide their assets in offshore accounts. In the past, NRIs staying in USA may have experienced a certain level of leniency when it comes to declaring their foreign assets. This is no longer the case. The FBAR is one such initiative by the government of the United States of America to crack down on tax evaders, and one that all NRIs must pay close attention to. The FBAR is an abbreviation for Foreign Bank Account Report. If you have an amount of more than US$ 10,000 in an offshore account, you will be required to file FBAR. Keep in mind that this is the aggregate amount. This means that if you have multiple offshore accounts, and the balance of all of them together is US$10,000 or more, you are liable to file an FBAR. Even if the total hits US$10,000 for an hour in past year, this invites a liability to file an FBAR form. In Indian rupees, this amount is roughly equal to INR 6,47,000 (slight variations may accrue, based on exchange rates). If your Indian accounts together show a balance of this amount or more, then you should definitely file an FBAR.
What is FATCA?
The FATCA is an abbreviation for Foreign Account Tax Compliance Act. US citizens who live outside the United States of America are required to file this form if their assets exceed the minimum slabs, which are given below:
- Value of your assets is worth US$ 200,000 or more on the last day of the financial year or was more than US$ 300,000 at any point during the year for a single filing
- Value of your assets is worth US$ 400,000 or more on the last day of the financial year or was more than US$ 600,000 for a jointly married filing.
- You will need to file all your reports in US dollars, hence it is important that you convert the value of your assets into dollars, and not in rupees.
- If you fall within this category, then you should file Form 8938 (Statement of Specified Foreign Financial Assets)as an attachment to your federal tax return. You must disclose those assets to enable the IRS to ensure that any taxes on income earned on those foreign assets have been paid.
How Can You File FBAR And FATCA?
You can now file your FBARs electronically, on the BSA E-Filing System via FinCEN Form 114. On the other hand, you can file FATCA (Form 8938) along with your US tax returns for the year.>
What Are The Filing Deadlines?
The FBAR should be filed by the 30th of June for that particular year. The FATCA should be filed by the date your tax returns are due.
What Are The Penalties For Failing To File?
For failing to file FBAR, you will be asked to pay 50% of your account balances if the failure to file is deemed willful. If it is deemed non-wilful, then the penalty is up to US$10,000 permission.
For failing to file FATCA, the maximum penalty is US$ 60,000. However, the IRS can also press criminal charges on you, depending on your particular case.
Now that you have gone through this article, you should have a clear idea about the difference between FATCA and FBAR filings in the United States of America. In addition, you should now be able to successfully compare FATCA and FBAR to ensure that you meet all the FBAR and FATCA requirements. This knowledge is the first step in ensuring FBAR and FATCA compliance on your part. While we are here to help you with any further queries in the comments section, we also recommend that you get in touch with a trusted, registered attorney in the United States of America. Once you show them a copy of all the relevant documents, they will be able to help you meet all your FBAR and FATCA requirements and ensure that you are on the right side of American law.