IRS FATCA FAQs: What Do U.S. Taxpayers with Offshore Assets Need to Know in 2022?

For U.S. taxpayers who own offshore bank accounts and other foreign financial assets, understanding their obligations under the Foreign Account Tax Compliance Act (FATCA) can be difficult. But, it is also extremely important—FATCA violations can carry civil or criminal penalties depending on the circumstances involved. In this article, New Jersey international tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, highlights some key information from the IRS’ FATCA FAQs.

What U.S. Taxpayers Need to Know About FATCA Compliance in 2022

Each year, the IRS reviews and updates (if necessary) its Basic Questions and Answers on Form 8938. Here are some of the key answers U.S. taxpayers need to know in 2022:

The Definition of “Specified Foreign Financial Assets” Hasn’t Changed

The definition of “specified foreign financial assets” that are subject to disclosure under FATCA remains unchanged for 2022. This means that offshore accounts, interests in foreign entities held outside of financial accounts (including stocks and other securities), foreign options and derivatives, and other foreign financial instruments remain subject to disclosure. It also means that foreign currency, real estate and tangible assets held for investment purposes do not need to be disclosed on IRS Form 8938.

The FATCA Reporting Thresholds Also Remain Unchanged for 2022

The FATCA reporting thresholds also remain unchanged for 2022. For individual taxpayers residing in the United States, this means that it is only necessary to file IRS Form 8938 if the total value of your specified foreign financial assets was either: (i) more than $50,000 on the last day of the tax year; or, (ii) more than $75,000 at any time during the tax year.

Estimating is Permitted Under FATCA (When Warranted)

With regard to valuing specified foreign financial assets for purposes of FATCA compliance, the IRS states: “You may determine the fair market value of a foreign financial account for the purpose of reporting its maximum value based on periodic account statements unless you have reason to know that the statements do not reflect a reasonable estimate of the maximum value of the account during the tax year.” When account statements are unavailable or do not reflect a reasonable estimate of an asset’s maximum value, “you do not need to obtain an appraisal by a third party in order to reasonably estimate the asset’s maximum value during the tax year.”

Taxpayers May Need to File IRS Form 8938 and an FBAR

Another aspect of international tax compliance that remains unchanged for 2022 is that taxpayers may need to file both IRS Form 8938 and an FBAR in order to meet their foreign financial asset disclosure obligations. While the FATCA filing requirement applies to all specified foreign financial assets, the FBAR filing requirement applies specifically to offshore accounts—but its reporting threshold is much lower than the threshold under FATCA.

Speak with New Jersey International Tax Attorney Kevin E. Thorn

Kevin E. Thorn, Managing Partner of Thorn Law Group, is a New Jersey international tax attorney who represents taxpayers in all FATCA and FBAR-related matters. To schedule a time to speak with Mr. Thorn in confidence, please call 201-355-8202, email ket@thornlawgroup.com or contact us online today.