FATCA: U.S citizens living in Canada – financial asset reporting
Part III: Asset value threshold for FATCA reporting
U.S. citizens who are currently living in Canada or abroad are required to file Form 8938 (FATCA form) if they meet certain asset value thresholds, as follows:
- In case of unmarried taxpayers filing as single, if the total value of your foreign financial assets exceeds US $200,000 on the last day of the tax year (December 31), or US $300,000 at any point during the tax year
- In case of married taxpayers filing jointly, if the total value of your foreign financial assets exceeds US $400,000 on the last day of the tax year (December 31), or US $600,000 at any point during the tax year.
- In case of married taxpayers filing separately (common scenario for U.S. citizen filers with non-U.S. citizen spouse who does not have taxpayer identification number, such as SSN), if the total value of your foreign financial assets exceeds US $200,000 on the last day of the tax year (December 31), or US $300,000 at any point during the tax year.
For purposes of Form 8938, the definition of a taxpayer living abroad is one of the following:
- A U.S. citizen or resident who has a foreign tax home and is a bona fide resident of a foreign country for an uninterrupted time period that includes the entire tax year;
- A U.S. citizen or resident who has been physically present outside of the United States for 330 full days during any period of 12 consecutive months that ends during the tax year being reported.
What assets need to be reported?
Only specified foreign financial assets are required to be reported on Form 8938. Generally, assets you are required to report include, but are not limited to the following:
- Any financial accounts maintained by foreign financial institutions (deposit, custodial, stocks and securities);
- Any foreign financial assets held for investment, such as stocks or securities issued by non-U.S. persons;
- Any interest in a foreign entity;
- Interests in foreign estates or foreign trusts;
- Life insurance/annuity contracts with cash value issued by a foreign entity;
- Interests in foreign pension plans and foreign deferred compensation plans; and
- Other similar financial assets.
Specified foreign assets would include your foreign bank accounts, but not assets such as your house. If you require additional details on asset reporting, contact us at 1-844-829-3678 to speak with an experienced qualified U.S. tax advisor.
What assets are not required to be reported?
Typical financial accounts that are not required to be reported include:
- Financial accounts maintained by a U.S. financial institution;
- Financial accounts maintained by an overseas branch or a foreign subsidiary of a U.S. financial institution;
- Financial accounts maintained by a U.S. branch of a foreign financial institution;
- Financial accounts maintained by a dealer or a trader in securities or commodities when certain requirements are met.
If you have reported the following specified foreign financial assets on other IRS forms, then you do not have to report them again on Form 8938 (this is known as duplicate reporting; note that you still need to indicate on Form 8938 that you have already reported the respective financial asset/account on other IRS form):
- Trusts and foreign gifts reported on Form 3520;
- Ownership in foreign corporations reported on Form 5471;
- Investments in Passive Foreign Investment Companies (PFICs) reported on Form 8621;
- Interest in foreign partnerships reported on Form 8865.
You don’t have to file form 8938 (FATCA form) if you are not required to file a U.S. tax return (even if you meet form 8938 filing threshold amounts)!
How do I value my assets for reporting?
In order to know if you meet the filing thresholds, you will need to determine the value of your assets for FATCA filing purpose. Typically, a sensible estimate of the highest fair market value of the asset is reported.
- For assets that are denominated in a different currency than U.S. dollar, you must find the value, then convert the denomination into U.S. dollars. You can view current rates here.
- Any assets that have a value of less than zero, are simply valued at 0. They are not used to offset the value of your other assets.
- To determine the maximum financial value of a financial account, you may rely on periodic financial statements for reporting purposes.
- You may rely on the year-end value of an asset if you have a specified foreign financial asset that is not held in a financial account.
- You can determine the fair market value of a specified foreign financial asset based on information that is publicly available from a reliable financial information source.
- If you cannot find reliable financial information regarding the market value of an asset, you can input a reasonable estimate.
- Special rules for reporting the value of an interest in a foreign trust, retirement plan, estate.
- There are special guidelines exist for those assets for which fair market value is indeterminable.
There are many guidelines and rules for reporting assets. If you are unsure and require assistance, do not hesitate to contact our experienced qualified U.S. tax advisors! We can help.
How does the IRS obtain information about my offshore assets?
Foreign institutions supply the IRS with the information about accounts that are held by U.S. citizens or residents, a practice known as third-party reporting. Information reported can include your identity and corresponding financial information. This is why many foreign banks require U.S. account holders to fill out and sign Form W-9, Request for Taxpayer Identification Number and Certification.
In light of the IRS lately doubling down on foreign banks to obtain names, SSNs and financial information on assets that are held by U.S. citizens and residents offshore, the awareness of the need to follow FATCA provisions is becoming more prevalent.