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  1. #1
    Join Date
    Jul 2019
    Posts
    2

    Question Fbar, Fatca Filing and Spouse

    Asking for my sister:

    Married 2012
    Husband opened a foreing account a few years prior to the marriage and never reported the account on FBAR or FATCA, but was required to.
    The husband and wife have filed joint tax returns during these years, but the account is solely owned by the husband, and is a separate property as defined in the prenuptial agreement. Wife doesn't have signature authority nor financial interest over the account.
    Wife also has no prior knowledge of this foreign account.
    The husband is considering entering the streamlined program.


    Is the wife subject to penalty under the law of FBAR or FATCA?
    1. From our understanding, since FBAR is filed by individual so only the husband is subject to penalty, and the wife is not. But we are not 100% sure
    2. How about FATCA (form 8938)? Since they filed joint returns that the wife signed, is the wife subject to FATCA penalty because of this? If yes what are the ways the wife can protect herself? And how much penalty amount for the wife? Does innocent spouse apply here?

    Thanks a lot.

  2. #2
    Join Date
    Oct 2016
    Posts
    3,043

    Default Re: Fbar, Fatca Filing and Spouse

    Your sister needs to be asking her own questions. Whomever she asks these questions of will need the state she is a resident of.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,306

    Default Re: Fbar, Fatca Filing and Spouse

    Quote Quoting Agrilin
    View Post
    Asking for my sister:
    1. From our understanding, since FBAR is filed by individual so only the husband is subject to penalty, and the wife is not. But we are not 100% sure
    The FBAR penalty applies only against the person who holds the foreign account and failed to report it. The FBAR requirement and penalty are not actually part of the tax code (which is Title 26 of the U.S. Code) but rather a provision in Title 31 of the U.S. Code and is administered by the Treasury Financial Crimes Enforcement Network (FinCen). However, under an agreement between FinCen and IRS, the IRS handles the enforcement of the FBAR penalty. So this is not a tax matter, even though the IRS is involved in assessment and enforcement of the penalty. As a result, the fact that they filed a joint income tax return is irrelevant here.

    Quote Quoting Agrilin
    View Post
    2. How about FATCA (form 8938)? Since they filed joint returns that the wife signed, is the wife subject to FATCA penalty because of this? If yes what are the ways the wife can protect herself? And how much penalty amount for the wife? Does innocent spouse apply here?
    On the other hand, the Form 8938 is part of your federal income tax return. When a married couple files a joint income tax return, they are each jointly and severally liable for all items on the return and both are responsible for the accuracy of the return. So the penalty for not filing the Form 8938 may be assessed against them jointly for years they filed joint returns. However, for the spouse who does not own the account it may be possible for that spouse to get relief from the innocent spouse provisions.

    Quote Quoting PayrolGuy
    View Post
    Whomever she asks these questions of will need the state she is a resident of.
    Actually, no. This is an issue purely of federal law and does not impact her state income tax at all (assuming they are in a state that has an income tax). The state in which she resides does not matter.

  4. #4
    Join Date
    Jul 2019
    Posts
    2

    Default Re: Fbar, Fatca Filing and Spouse

    Thank you, I'm the sister. I just learned those reporting requirements recently. The IRS seems to be very harsh on the fbar penalty but not as much on FATACA (why.. seems to be the same thing?). The internet says that for FATCA, criminal charge is possible though. I'm not sure how serious is the IRS about this, but as an innocent spouse, is it likely to be criminally charged in this case? Should I consult my lawyer? Thank you.

  5. #5
    Join Date
    Oct 2014
    Posts
    7,306

    Default Re: Fbar, Fatca Filing and Spouse

    Quote Quoting Agrilin
    View Post
    Thank you, I'm the sister. I just learned those reporting requirements recently. The IRS seems to be very harsh on the fbar penalty but not as much on FATACA (why.. seems to be the same thing?). The internet says that for FATCA, criminal charge is possible though. I'm not sure how serious is the IRS about this, but as an innocent spouse, is it likely to be criminally charged in this case? Should I consult my lawyer? Thank you.
    It's not the IRS that causes the harshness of the FBAR penalty, it is how Congress wrote the law for the FBAR penalty. They are not the same thing; indeed, a person may have the requirement to do both filings, or might have to do just one or the other as the filing requirements differ. The failure to file either one when required could result in criminal penalties, but for the spouse of the person with the foreign accounts there would be no criminal charges simply for the account holder failing to file. The spouse of the account holder would have to actively participate in attempting to hide the accounts from the Treasury to be criminally liable. Even for the person with the foreign accounts criminal charges are not common. But if the IRS determines the failure to file was willful the penalties for the failure to file can be very high indeed.

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