How report maximum value in a foreign bank account, if the same money was in two different accounts at two different times

[dasherson]

I have two foreign accounts to be reported on Form 8938 and FBAR.

Account 1: On May 1, 2019 the maximum value in this account was $150,000.  On May 13, 2019 this $150,000 was transferred to Account 2. The next day, May 14, 2019 the $150,000 was wired from Account 2 to me in the USA.

Do I need to report the maximum balance in Account 1 as $150,000, AND ALSO report the maximum balance in Account 2 as $150,000?  

[KarenJ2]

For the FBAR. you need to report both accounts as they both had $150,000 on on any one day during the calendar year.

If Form 8938 applies to you, I would report both accounts as the total value of the assets,were more than $x dollars on the last day of the year or more $x dollars at anytime during the year.

Remember these are just information forms that can lead to significant penalties if all assets are not reported.

[dasherson · Accepted solution]

Thank you for your reply. I do complete a Form 8938.  Are you suggesting in Part 1 of Form 8938 Point # 2 - 'Maximum Value of all Deposit accounts', I should enter $300,000 and not $150,000?  The total amount of money I owned was $150,000.

[KurtL1 · Accepted solution]

Per Instructions for Form 8938  you must report the maximum value during the tax year of each specified foreign financial asset reported on Form 8938. There is no exception given if there was a transfer between reportable accounts.

[dggu]

I agree I should put the maximum value of each account in part V of 8938.  I'm not sure I should add those together for line 2 in part I.  In the example of two accounts with 150 transferred between them then the max for each is 150 and the overall max is 150.

Turbo Tax 2019 is adding all my Part V's and making an inaccurate total.  

Which is correct?

[dggu]

I agree I should put the maximum value of each account in part V of 8938.  I'm not sure I should add those together for line 2in part I.  In the example of two accounts with 150 transferred between them then the max for each is 150 and the overall max is 150.

Turbo Tax 2019 is adding all my Part V's and making an inaccurate total.  

Which is correct?

[I think I put this in the wrong place a few mins ago]

[MaryK4]

TurboTax is correct- the amount must include the total in the accounts even if it is the same money transferred.  I understand how it looks like more than the total you have, but the 8938 is an Informational return only- the only way you can get in trouble is if you are doing something illegal (which you are not) or if you do not report it correctly (which is why you asked here).  

@dggu

[Hmmmmm]

I have had this debate with the firm (large global) preparing my taxes and heard the same thing with respect to Form 8938 and reporting the maximum aggregate value of all assets.  I was told "it is the sum of the max of each account.  Don't worry about it, it is only informational."  (also this is how their software is coded)

In disbelief, I contacted the IRS (Help Line – Regulatory Law) for clarification.  I was advised that the intent of the line was to report the maximum aggregated value of all assets for the period and NOT the sum of the maximums for each account.  So MAX (Acct 1 + 2+ 3) during the period and not MAX 1 + MAX 2 +MAX 3.

A rather indigent IRS advisor said... "You are over thinking this. The aggregate max value is the max value of all accounts at a single point in the year.  It is not the sum of the maximums of each account.  That would be stupid."  He further advised my tax firm correct their software and call the IRS and that maybe I should find another company to prepare my taxes.

What about clarifying the instructions for this form? .... The advisor said that clarified instructions were not required as the intent is clear for the maximum total value of assets held were to be reported and reporting the sum of the maximums may overstate this amount.

Incidentally, I suspect the logic for this line is confused by the foreign asset reporting requirement limit which is if the sum of the maximum (MAX1 + MAX2 + MAX3) for each account is >10K.

Since the software could not changed and the value overridden, we added a statement that indicated the correct value.  Maybe next year, the software will be corrected. 

[someguy12345]

I cannot find any official information which would support how Turbotax is doing the calculation (sum of all max values). Logic, how the actual form questions stands ("Maximum value of all deposit accounts") and conversation with IRS which is mentioned by user "Hmmmmmmmmm" above strongly suggest that Turbotax is doing wrong thing and refuses to correct the error.

Probably IRS lets it go as this is not the most important field on the form anyway but it seems that it's is simply wrong.

[felkhati1970]

I have a foreign account 1 with balance let's say 300k. I opened a new account # 2 and transferred 200k to it from account #1. Balance in account#1 is 100k and balance in account#2 is 200k. I report maximum value for each individual account (i.e. 300k for account #1 and 200k for account #2). The total maximum amount for both account at any given time is still 300k However, in form 8938 part 1 line 2, Turbotax is reporting 500k (adding the maximums of both accounts 200k+300k). Is the 500k is supposed to be reported? Is turbotax interpreting this correctly by adding the maximums or this is an error? Thanks

[npierson7]

Yes, that's a correct calculation. You supposed to report the maximum value of your accounts at any time during the year.

This form is informational only and doesn't impact your tax liability. 

[someguy12345]

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@npierson7 wrote:

Yes, that's a correct calculation. You supposed to report the maximum value of your accounts at any time during the year.

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First of all I am not a tax advisor or expert, just another tax payer with similar issue. It is not a tax advice just summary of what I've found out online. But don't just trust "tax experts" because they are not giving you full answer...

The statement above by "npierson7" is simply not true or half truth at best and it's rather concerning that Tax Expert of Turbo Tax is giving such response....

The maximum value of his/her "accounts at any time during the year" is $300k and not $500k. If you have any doubts about it ask yourself... If the house price was $500k, was this person able to buy it at any time of the year? NO. If it was worth $300k was this person able to buy the house? YES, because he/she had "maximum value of the accounts during tax year" of 300k, not 500k!

Let me ask it differently. If the person above came to you, nprieson7, and said: Please take the accounts I have and pay me $400k would you do it? Their maximum value is $500k so why not? You would get something with "max value" of $500k for $400k? No? Maybe because maximum value is 300k and not 500k? 

Dear felkhati1970,

The best answer you will here is below as I've spent too much time researching exactly the problem you have.

No. One. Gives .A. **bleep**.

The maximum value of your accounts in any given moment of the year is obviously $300k and this is likely the value you should put into the form... BUT

- Calculating such value with 2 accounts is trivial. In my case with something like 24 accounts, including 4 pension accounts in three countries is very hard as I moved money around a bit and pension accounts change value each day. I would need to basically calculate value for each day in a year, for each account and pick the max day. This is not practical, this is crazy.

- I had my taxes done professionally by PwC for 6 years. They've always done what TurboTax does so sum up all the values. They knew it's not super accurate and double counts some money but they never had problems so why not take the easy way.

- I have a friend in another major, global tax company. They do the same thing. They know it might not be correct. No one cares.

 - TurboTax does it like that for probably dozens of thousands Americans every year for many years. They were not forced by IRS to fix it. No one cares.

- I found a person who actually managed to talk to IRS about it (it's somewhere in this forum). They confirmed that TurboTax is doing it wrong but.... it seems no one cares.

Long story short. No one cares. It does not impact your tax due. IRS tolerates all major companies doing it in a wrong way because it's not that important apparently. Is it correct? NO! It's not. But I will just file as TurboTax calculates it and let them fix my problems if their calculation is wrong and for some weird reason IRS decides that after seeing literally millions of wrongly filed forms they are going to force people to spend hours calculating the real max value of their accounts.

[ReneeM7122]

Turbo Tax will ask you if you have foreign accounts.  If you answer 'yes,' it will bring you to the place where you answer questions to complete Form 8938 (FATCA).  You can find the form by searching for it on the Federal tab.

The FBAR might be required as well.  You don’t file the FBAR with the IRS or with TurboTax.  It must be filed directly with the office of Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, separate from the IRS.   TurboTax does not file the FinCEN.  Here is a link to the BSA E-Filing System.

If your foreign account has $10,000 or more in it that's when those forms come into play.   Again, these are the forms:

• FATCA - Form 8938

• FBAR - FinCEN Form 114 

 FBAR and FATCA are two separate reporting events filed in two separate places. 

Foreign Accounts Tax Compliance Act (FATCA)

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The IRS receives information about foreign assets on form 8938 on your federal tax return. 

FBAR - Report of Foreign Bank and Financial Accounts (FinCEN Form 114) 

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.   The name of the form to file If you have any questions or require technical assistance using the BSA E-Filing system, you may call them at 866-270-0733;  or if calling from outside the United States, 313-234-6146. 

 Report of Foreign Bank and Financial Accounts (FBAR)

   Here is an IRS article that explains the comparison between FATCA and FBAR requirements.

@someguy12345

[someguy12345]

Sorry ReneeM7122 but you've just posted manual. It has nothing to do with question of the original poster and nothing to do with my answer. Going around and posting random stuff is disrespectful towards Turbo Tax clients.

[xdcr]

Awesome. Thank you for your clarification. Crystal clear. appreciate!