- 1 Form 8938 (Specified Foreign Asset Filing Requirements)
- 2 Form 8938 Is Required Only if a Tax Return Is Required
- 3 Different Rules for US vs. Foreign Residents
- 4 Form 8938 Is More Encompassing Than FBAR
- 5 Must have an Interest in the Asset
- 6 Not on Automatic Extension Like the FBAR
- 7 Golding & Golding: About Our International Tax Law Firm
Form 8938 (Specified Foreign Asset Filing Requirements)
Since 2011, US Taxpayers who have certain specified foreign financial assets located outside of the United States have to report those assets each year on an IRS Form 8938 (if they meet the threshold requirements). This form was developed in accordance with FATCA (Foreign Account Tax Compliance Act) and is filed with the tax return. The form is similar in concept to the notorious FBAR, but the form has its own set of filing requirements and is not mutually exclusive from the FBAR. As was with any international information reporting form, if the Taxpayer fails to properly file the form, they may be subject to Form 8938 fines and penalties — although these penalties can oftentimes be avoided or abated. Here are five tips about Form 8938.
Form 8938 Is Required Only if a Tax Return Is Required
Unlike many of the other international information reporting forms, Form 8938 is only required in a year that the Taxpayer is required to file a tax return. In other words, if the Taxpayer is not required to file a tax return in the current year, they are not required to file a Form 8938 in the current year as well. Some Taxpayers are under the misimpression that they are required to file a tax return just so that they can file Form 8938 even if they were not otherwise required to file a tax return, in order to report the foreign account/assets —but this is not the case.
Different Rules for US vs. Foreign Residents
With some forms such as the FBAR and Form 3520 gift reporting, there is one set of threshold requirements and if the Taxpayer meets the threshold for filing, they are required to file the form. Form 8938 works a bit differently in that there are multiple threshold requirements depending on whether or not the Taxpayer is filing Married Filing Joint (MFJ) versus Single or Married Filing Separate (MFS) and whether or not the filer is a US resident or foreign resident. A US person who files single or separate and resides in the United States has the lowest threshold for filing ($50,000/$75,000), whereas a married couple residing abroad would have the highest threshold ($400,000/$600,000).
Form 8938 Is More Encompassing Than FBAR
Form 8938 requires additional assets beyond what would be required to be reported on the FBAR. For example, if a person owns direct stock that is not in an account, then they are not required to report the direct stock ownership on the FBAR, but they are required to include it on Form 8938.
Must have an Interest in the Asset
Another key fact about Form 8938 is that the Taxpayer has to have an interest in the account or asset. For example, if the Taxpayer is an employee with signature authority over a foreign account or otherwise merely has signature authority over an account and no interest in the account, they are generally not required to file the form (exceptions, exclusions, and limitations do apply).
Not on Automatic Extension Like the FBAR
For the past few years, the FBAR has been on automatic extension, which means that a Taxpayer automatically has until October to file the form without having to make a formal request to extend the time to file. With Form 8938, it is not on automatic extension, so in order to request an extension to file Form 8938, the Taxpayer must request an extension for the entire tax return, which typically requires filing a Form 4868.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax and specifically IRS offshore disclosure.
Contact our firm today for assistance.