How to Report Form 8938 Foreign Assets to IRS

Form 8938: The FATCA Reporting Foreign Asset Form for individuals was introduced on the 2011 tax return. The Form 8938 is part of FATCA (Foreign Account Tax Compliance Act), and is used to report Specified Foreign Financial Assets, along with the foreign income generated from the foreign assets.

There are different threshold requirements for filing, depending on marital/filing status, and U.S. vs. foreign residence.

The 8938 Form is oftentimes compared to the FBAR. And, while the FBAR and Form 8938 are similar, they are not identical — and mot mutually exclusive of each other.

Form 8938 is a very important IRS international reporting form, and one of the main components to being in offshore compliance.

What is a Form 8938 Specified Foreign Financial Asset?

There are many different types of specified foreign financial assets. In addition, the Taxpayer must also identify the corresponding income.

Common Foreign Assets:

  • Foreign Corporations
  • Foreign Pension
  • Foreign Life Insurance
  • Foreign Bank Accounts
  • Foreign Investment Accounts

Common Types of Foreign Income:

  • Dividends
  • Interest
  • Capital Gain
  • Royalties
  • Bonus

Examples of Form 8938 assets:

  • Foreign Bank Accounts
  •  Foreign Savings Accounts
  • Foreign Investment Accounts
  • Foreign Securities Accounts
  • Foreign Mutual Funds
  • Foreign Trusts
  • Foreign Retirement Plans
  • Foreign Business and/or Corporate Accounts
  • Foreign Life Insurance Policies
  • Foreign Accounts held in a CFC (Controlled Foreign Corporation); or
  • Foreign Accounts held in a PFIC (Passive Foreign Investment Company)
Form 8938: IRS Threshold Rules for Taxpayers with Foreign Assets

Form 8938: IRS Threshold Rules for Taxpayers with Foreign Assets

Who Has to File Form 8938

The Form 8938 is required by many different types of taxpayers. Filers may include: U.S. Citizens, Legal Permanent Residents, Visa Holders, Corporations, Partnerships, Trusts and Estates.

Form 8938 Threshold for Reporting

The threshold filing requirements vary based on whether a person is filing as single, separate or married filing jointly, and whether the person files as a U.S. resident or foreign resident.

The thresholds for filing can be broken down into four (4) categories:

Taxpayers Living in the United States

The rules for Taxpayers living in the U.S.:

Unmarried Taxpayers

If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Married Taxpayers Filing a Joint Income Tax Return

If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.

Married Taxpayers Filing a Separate Income Tax Return

If you are married and file a separate income tax return from your spouse, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Taxpayers Living Outside in the United States

The rules for Taxpayers living outside the U.S.:

Unmarried Taxpayers

If you are not married, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.

Married Taxpayers Filing a Joint Income Tax Return

If you are married and you and your spouse file a joint income tax return, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Due Date for IRS Form 8938

Unlike other international information reporting returns, the Form 8938 is due to be filed at the same time a U.S. taxpayer’s Tax Return is due. Therefore, for most (U.S. Resident) taxpayers, the form will be included as part of the 1040 submission in either April or October. It is one of the few international tax forms included as part of TurboTax and Tax Act software.

If a person files for an extension of time to file their tax returns, the Form 8938 also automatically goes on extension. In other words, the filer does not need to file a separate extension for Form 8938.

*In addition, if a Taxpayer does not need to file a tax return because for example they are under the filing threshold a tax return, then they do not need to file a separate 8938.

**The FBAR rules are different for Taxpayers who do not need to file a tax return. With the FBAR, a U.S. person must still file an FBAR, even if they are below the tax return filing threshold — if they meet the FBAR filing threshold.

Reasonable Cause Exception for Late Filing.

IRS Form 8938 Penalties may be avoided with Reasonable Cause.

“No penalty will be imposed if you fail to file Form 8938 or to disclose one or more specified foreign financial assets on Form 8938 and the failure is due to reasonable cause and not to willful neglect. You must affirmatively show the facts that support a reasonable cause claim.

The determination of whether a failure to disclose a specified foreign financial asset on Form 8938 was due to reasonable cause and not due to willful neglect will be determined on a case-by-case basis, taking into account all pertinent facts and circumstances.”

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