What is the difference between FBAR and FATCA?
What does FBAR do?
If you’re a US person (that includes green card holders and tax residents), and you’ve got foreign bank accounts that hit over $10,000 at any time during the year, you need to file an FBAR (Foreign Bank and Financial Accounts Reporting). Let’s look at an example, say you’ve got two accounts in Saudi. One’s got $5,000, and the other’s sitting at $6,000. Together, they cross the $10,000 mark, so you’ve got to file an FBAR.
However, let’s say that you have an additional account that didn’t see any action and stayed at zero. It still counts in the total, so you will still have to report it along with the other accounts.
Is my FBAR taxed?
Remember, FBAR is just to let the US government know about your foreign accounts. They don’t directly tax the money in them. Taxes come into play only if those accounts earn income, like interest, which you will have to report on your 1040 tax return.
What is FATCA?
Separate from FBAR, FATCA (Foreign Account Tax Compliance Act) is about an agreement between foreign banks and the US government. It’s tied to Form 8938, which is part of your tax return.
FATCA’s filing requirements vary based on where you live and your filing status, and they’re generally higher than FBAR’s $10,000 mark.
Do the banks report my bank information to the US?
Banks report account info of US persons to comply with FATCA, which is why you need to file your FBAR and Form 8938 to stay on the right side of US laws.
If you forget to file, it could cost you big time, from $10,000 to half of your account’s highest balance.
What happens if I missed or forgot to report?
If you’ve missed filing FBARs or tax returns, talk to a tax advisor. They can help you figure out the best way forward, like using the IRS’s Streamlined Filing Compliance Procedures, an amnesty program for those who didn’t know about their filing duties.
What are the key points to remember about FBAR and FATCA?
- FBAR and FATCA Are Must-Dos: As a US expat, you can’t skip these. They’re about keeping things transparent with Uncle Sam.
- Report Every Account: Got foreign accounts? Add up their highest balances. If it’s over $10,000, report them all.
- Get Expert Advice: These rules can be tricky. A tax pro can help you with them and avoid legal headaches.
Why does this matter to me when I’m in Saudi Arabia?
Living in Saudi Arabia as a US citizen or green card holder means you’ve got to keep an eye on these regulations. They’re not just about taxes; they’re about letting the US government know where your money is and how much. This transparency is key to avoiding penalties and staying compliant.
Do you have any additional tips I can use?
- Keep Records: Document your account balances and any income they generate. This makes filing easier and more accurate.
- Understand the Forms: FBAR is filed separately from your tax return, while Form 8938 goes with your 1040.
- Deadlines Matter: FBAR is due April 15, with an automatic extension to October 15. FATCA follows your tax return’s schedule.
- Stay Informed: Tax laws can change. Keeping up-to-date ensures you’re always compliant.
For US expats in Saudi, understanding and complying with FBAR and FATCA is a crucial part of financial life abroad. It’s not just about avoiding penalties; it’s about maintaining a clear and compliant financial standing with the US government. So, when in doubt, reach out to a tax expert.
