A Form 8938 Beginner’s Guide to Foreign Assets (FATCA)

A Form 8938 Beginner’s Guide to Foreign Assets (FATCA)

When it comes to having to report foreign accounts and assets on various international information reporting forms to the IRS, Form 8938 is a relative newcomer to the world of international tax. The Form 8938 is like the FBAR — but it is not identical. Thus, while, some Taxpayers may have to file Form 8938 to disclose accounts and assets they already reported in the same year on the FBAR, other Taxpayers will not have to duplicate the reporting because either they do not have a financial interest in the account, or the threshold requirement is below the Form 8938 threshold. For Taxpayers who are new to international reporting, here is a quick beginner’s guide to assist you with filing 8938.

Who Must File Form 8938?

If a person is a U.S. person for tax purposes and they were filing a tax return and they meet the threshold requirements for having to file a Form 8938, then they are required to file the form. In the most common situation, a Taxpayer will have multiple foreign accounts that exceed the threshold filing requirements in that year. Therefore, when the Taxpayer follows their US tax return, they will include a Form 8938 to report their foreign accounts. Even if they already reported those foreign accounts on an FBAR, they are still required to file a Form 8938.

Do I File a Separate From 8938 from my Tax Return?

No. This is where I can get a bit confusing because the FBAR — which is a similar form — is not filed with a tax return but is instead filed separately and directly on the FinCEN website. In other words, if a Taxpayer is filing a tax return and is required to file a Form 8938 then the Form 8938 will be filed as part of their U.S. tax return.

When is the Form 8938 Due?

The Form 8938 is due when the Taxpayer’s tax return is due. If the Taxpayer files an extension for their tax return, then the form 8938 goes down extension as well so that the Form 8938 is filed as part of the tax return. One important fact to remember about Form 8938 is that it is only required in a year in which the Taxpayer is required to file a tax return in that year. Therefore, even if the Taxpayer meets the threshold requirements for having to file a Form 8938 come if they are not required to file a tax return come and then they’re not required to file Form 8938 in that year — even if they have to file the FBAR in that year.

Which Assets are Reportable?

Many different types of foreign assets are reportable for Form 8938 purposes. Some of the more common types of reportable assets include bank accounts, investment accounts, pooled funds such as mutual funds or ETFs, pension plans, and certain foreign life insurance that has a surrender or cash value.

What does having a ‘Financial Interest Mean?

When a person has a financial interest in the account, it typically means that they have some ownership of the funds in the account. For example, if the Taxpayer owns a bank account with $150,000 in it, then presumably they would have a financial interest in that account. Alternatively, if the Taxpayers family member asked him to be a signatory on the account come up with none of that money belongs to the Taxpayer and when the owner of the account passes away the funds will be going to a third party and not the Taxpayer, then presumably the Taxpayer would not have a financial interest in that account.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.