FBAR and 8938 - Amendment Needed for Missing Account?
 

Questions about these haunting forms again!

On a return to the UK recently, I discovered I had a savings account that I didn't even recall I had (the statements had been going to my elderly parent's address and they had just been filing them away without telling me). The balance was less than 10 pounds and interest was minimal (less than 5 pence per year for last many years) - wouldn't have affected my tax liability as I always round up my interest by a few dollars on My Schedule B anyways). I closed the account

I've been filing the IRS 8938 for 3 years, incuding for 2023 Tax Year: Started when I got my first Defined Benefit Pension Transfer Valuation (which put me over the reporting threshold, and I obtain a valuation every year now)
I've been filing the FBAR for 6 years, about to submit for 2023 Tax Year before the October 15th Deadline, including this closed account, which I will report as closed on 2024 forms.

Question is what to do with the prior year omissions of this account on my 8938/FBARS?

Do I just enter going forwards, or have to go through some crazy amendment/disclosure process for both the 8938 and FBAR, and am subject to fines?
Particularly for 2023 Tax Year, my FBAR will have this account on it and my 8938 does not (already filed). If prior year amendments are the right approach, I would likely seek assistance from a Tax Attorney/CPA to help me amend, I don't even know how to amend an 8938. Another headache, as no two firms seem to give the same advice on these forms, so I am always wondering - what is correct?

How far back do I need to go with the 8938 and FBAR amendments, if an amendment is the suggested route?

Appreciate anyone's advice on this one. Thanks!

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

You should refile FBARs for the prior 6 tax years 2018 through 2023, and refile Form 8938 for the prior 3 open tax years which would be 2021 through 2023 (if you met the thresholds in those years).

On one hand, if you correct the forms prior to the IRS or FinCEN contacting you, your risk and exposure is very low because there is no additional tax due, and the facts and amount involved should be a clear case of a non willful failure. Given the facts it very unlikely you would be fined more than a minimal amount, almost certainly nil. Rounding up your other interest saved the day because your exposure and options to correct would be a whole lot different if there had been unpaid tax involved.

On the other hand, in the extremely unlikely event that the IRS or FinCen decided to audit the forms before you correct them, even with a non willful failure you could face up to a $10,000 fine for failing to submit a correct FBAR, and another $10,000 for filing an incomplete Form 8938, for each year involved. A fine of that magnitude is extremely unlikely given your circumstances but is technically possible. (The IRA typically won’t apply a fine to delinquent FBARS if the accounts, interest paid, and tax due were reported on the corresponding tax return but since you did not report the account they could do so).

You could let sleeping dogs lie but failing to correct the situation would leave you open to the risk of the larger fines identified above, plus the statute of limitations on the tax years in which Form 8938 is incorrect will be open for ever. Likely no one would ever notice but why take the risk because fortunately in your circumstances there is a free and simple fix.

The FBARs can be amended online. If you have been personally filing the original ones online it should be easy to do so. To correct Form 8938 simply submit Form 1040X which again is fairly easy to do, especially if there is no change in income, deductions or tax due. You can take all the required numbers from your original return. In Part II Explanation of Changes simply state that on the original Form 8938 you overlooked a small account of $xxx value on the original Form 8938, and that you are attaching an updated Form 8938 to correct that omission. Identify the annual interest of $0.xx, and state that there is no additional tax due because you rounded up other interest payments on the original return. That is all they need to accept it and move on to other much more interesting returns. Use the same explanation on the FBAR.

You are unlikely to hear anything back from them, so do that for the years involved and you can happily move on. As I said, fairly easy to do it yourself, but if you want to use a domestic CPA they should charge a very reasonable amount because this is straightforward. If anyone suggests using one of the more complex solutions point out that there is no unpaid tax, the omission is simply a reporting error, and move on to another CPA.

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

Glasgow Girl Thanks so much for the thoughtful/comprehensive response. I appreciate the time you must invest in responding to these type of questions. I wish the process/requirements nuances of these forms was easier to understand for all, or at least less difficult for all to find consistent guidance from various Professionals. Seems like these forms are a persistent cloud of anxiety over the heads of a lot of Expats! Will go ahead and file the amendments you suggested. Thanks again!

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

OP, I have been here, hence my username.

Contact a CPA (some may see it as overkill), and have them help you get up to date.

Using my personal experience, once I had my FinCEN and 8938 back in order, I could sleep at night. I even file them myself (in my sleep!) now!

H

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

Time for the annual '8938' question (!):

Having fretted about reporting our pensions on our FBARS, we did so last year, although we now find out with more digging that defined benefit schemes may be excluded from the FBARS - but still have to be reported on the 8938. Fortunately we have avoided having to fulfil the 8938 filing requirement until 2025. 8938 is not overly onerous (particularly if you have the FBAR information), but where do you put pension information? Part V is essentially bank information, so you might think that Part VI ("Other Foreign Asset") would be the place - although not really set up for pension information. I believe that 'technically' defined benefit pensions are generally 'trusts' (although not 3520 reportable) - so I suspect that we need to complete lines 29-35?

Even the IRS (as ever) is not terribly clear (e.g. 'certain'):
https://www.govinfo.gov/content/pkg/...2024-09434.pdf
On March 16, 2020, the Treasury Department and the IRS issued Revenue Procedure 2020–17, 2020–12 IRB 539, which exempts from section 6048 information reporting requirements certain U.S. individuals’ transactions with, and ownership of, certain tax-favored foreign trusts that are established and operated exclusively or almost exclusively to provide pension or retirement benefits, or to provide medical, disability, or educational benefits.

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

I put my foreign pensions on lines 29-35, leave the GIN number blank and check corporation for the type of foreign entity (even though one is a SIPP and technically a trust). None of the options are accurate for foreign pensions but you have to check something and that is the least incorrect. The important thing is to declare the accounts, particularly the value, the account numbers and contact details of the holding institution. If they have that and taxes are being paid appropriately, I doubt they worry about the other details too much unless there is suspicion of attempting to hide something.

With regard to the FBAR if you have no knowledge of the value of a defined benefit plan then you don’t need to report it but if you have ever had anything that indicates a potential value such as a transfer value or anything that alludes to what it would cost in the private world to produce the same income as your pension, then you do have to report it. Best to just report it and be safe. If no knowledge of the value enter zero on both the FBAR and on Form 8938.

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

Excellent - many thanks!

Re: FBAR and 8938 - Amendment Needed for Missing Account?
 

Oh, and BTW, for some reason we had issues with our FBARS this year: first, acrobat reader (latest version) would not open the FBAR PDF - so had to use an old version of acrobat pro (license had run out, but opened the PDF file okay), then neither acrobat reader nor acrobat pro could file our FBARS - so we had to manually upload them to https://bsaefiling.fincen.gov/file/fbar/pdf - which seemed to work (got an acknowledgement that they had been 'accepted for processing').