Navigating the complexities of the U.S. tax system can be daunting, especially for expatriates who hold assets overseas. One such complexity is IRS Form 8938, a form that requires U.S. taxpayers to report their foreign financial assets. Understanding this form is crucial for compliance and peace of mind while living abroad.
Executive Summary
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Understanding Form 8938
Form 8938, also known as the "Statement of Specified Foreign Financial Assets," is part of the FATCA (Foreign Account Tax Compliance Act) regulations. It requires U.S. taxpayers to report foreign financial assets if they exceed certain thresholds along with their personal tax return. This form helps the IRS assess taxpayers' international tax compliance.
Currency Conversion for Reporting on Form 8938
Assets reported in form 8938 need to be converted into USD. The IRS requires that you use the Treasury's Financial Management Service rate as of the last day of the year or, if it's not available, another verifiable exchange rate and disclose the source of that rate.
Expert Insight: Accurate currency conversion is crucial; errors can significantly impact reported values. |
Threshold Requirements for Filing Form 8938
The filing requirements for Form 8938 are contingent upon your tax filing status and residency. Here's a simplified chart to help you determine if you need to file:
Filing Status | Living in the U.S. | Living Abroad |
Single and Married Filing Separately | Assets over $50,000 on the last day of the tax year or more than $75,000 at any time during the year | Assets over $200,000 on the last day of the tax year or more than $300,000 at any time during the year |
Married Filing Jointly | Assets over $100,000 on the last day of the tax year or more than $150,000 at any time during the year | Assets over $400,000 on the last day of the tax year or more than $600,000 at any time during the year |
Late Filing Form 8938 Penalties
Failure to file Form 8938 can result in a penalty of $10,000, and an additional $10,000 for every 30 days of non-filing after IRS notification, up to $50,000. Moreover, underpayment of tax attributable to non-disclosed assets can be penalized at 40%.
Expert Insight: Penalties for not reporting can be substantial, reflecting the seriousness with which the IRS views these disclosures. |
Difference Between FBAR and Form 8938
While both the FBAR and Form 8938 require the reporting of foreign assets, they serve different purposes and have different thresholds, filing dates, and requirements. Here's a comparison chart:
| Form 8938 | FBAR (FinCEN Form 114) |
Who Must File | Taxpayers with specified foreign financial assets exceeding certain thresholds | Any U.S. person with foreign bank accounts totaling more than $10,000 at any time during the calendar year |
Where to File | Attached to annual tax returns and filed with the IRS | Electronically through FinCEN's BSA E-Filing System |
Filing Deadline | Filed with the tax return, typically April 15, with possible extensions | April 15, with an automatic extension to October 15 |
Instructions to Completing IRS Form 8938
Personal Information and Filer Type (Lines 1-4)
Personal Information: Enter your name and TIN (SSN, ITIN, or EIN) as shown on your tax return.
Filer Status: Indicate whether you're filing as an individual, partnership, corporation, or trust. For entities, provide the TIN of the controlling individual or beneficiary.
Asset Summaries (Parts I and II)
Foreign Accounts: In Part I, summarize all foreign deposit and custodial accounts, including the number of accounts and their total maximum values. Indicate any account closures.
Other Foreign Assets: In Part II, list the total number of other foreign financial assets and their aggregate maximum values. Note any acquisitions or disposals.
Detailed Information and Reporting (Parts V and VI)
Account Details: For each account, provide specifics such as account type, number, institution details, and maximum value. Include currency conversion details if applicable.
Other Assets: Describe each non-account asset, its maximum value, and related transactions. For stocks or interests in foreign entities, include names, GIINs, and addresses.
Need Help With IRS Form 8938?
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