Form 8938 (FATCA) Reporting Threshold: Is it okay to remove duplicate funds (transferred from one account to another) to test against reporting threshold?

[coolhead]

We are married filing jointly and as per IRS provided info, the Form 8938 (FATCA) reporting threshold for us is "more than $150K in foreign assets at any time during the year" OR "more than $100k on the last day of the year". 

Let us say,  I have an Account A with $90K and another Account B with $5K. During the year I transfer $80K from Account A to Account B, so that at the end of year, we have (assuming no other inflow or outflow): Account A = $10K and Account B = $85K. So total value at the end of year= $10K + $85K = $95K  (which is less than the 'end of the year' $100K requirement).

However, my question is how does  the "more than $150K at any time during the year" test work. In the above example, did we cross the $150K threshold during the year. In my opinion, the answer is NO, but looking for informed opinion. Some folks have suggested that I should add the maximum value of each account ($90k + $85K) in the year to check against the during-the-year threshold. But this seems wrong to me as the amounts are being double-counted. What do you think?

[pk · Accepted solution]

All monies transferred between accounts is counted only once ( either at the transferred out account or at transferred into account -- same thing for roundtrip between accounts ) for the  max  value test or the year end value test.  Please consider visiting  www.irs.gov  and  search for form 8938 or FATCA  reporting requirements. It has examples  on how to deal with these situations. If you need more help, please comment

[coolhead]

Thanks. Unfortunately, the IRS website instructions for 8938 does not call this issue out clearly. However the common-sense literal meaning of the specified reporting threshold "total value of all assets more than $150K at any time during the year" will seem to validate your opinion (as the sum total value of all assets does not change if one transfers money from one account to another on a given day). But given the draconian penalties, just wanted to be certain. Thanks again.

[tbudd]

I'm in the exact same situation. My funds are getting double counted due to inter account transfers even though I'd have breached the reporting thresholds without the transfers.

But, with transfers, the amounts are going to be wrongly inflated. This issue has been nicely addressed in the context of FBAR in this article.

[user17568826280]

@pk ,  you answer makes sense. I would be absurd to double count when testing for the threshold. However, I too couldn't find well defined instructions or specific examples on this issue. I'd appreciate if you can share a pointer to those.

FWIW, the threshold testing for FBAR is quite confusing as well. On page 10 of the filing instruction, it suggests to aggregate the maximum value of all account, which would double count.

[pk]

@tbudd , I agree  that

(a) FBAR instructions on page 10 may lead to transfers between accounts being counted twice and seems kind of silly for purposes of determining threshold to report

(b) Similar issue exists for FATCA threshold determination

However, consider  that  your reporting  of the accounts  and  values  are matched against reporting by the Foreign  banks/financial institutions ( and they probably report both highest value and end-of-year amounts ).  Also while the report is not a taxable event, deliberate ignore of the requirement can attract odious fines.  Hence I generally suggest, even when in doubt, just  report and thus not attract any IRS/US-Treasury attention.

IMOH

Is there more I can do for you  ?