FATCA Form 8938 – Offshore Disclosure to Reduce IRS Penalty
IRS Form 8938 is a form that is filed with your IRS Tax Return.
It is often referred to as a FATCA (Foreign Account Tax Compliance Act) Form 8938. Unlike the FBAR (Report of Foreign Bank and Financial Accounts) which has been in existence since the 1970s and is filed electronically online directly with the Department of the Treasury, the 8938 form is a new form and enclosed with your 1040 tax return — in other words, you file the Form 8938 directly with the IRS.
What is IRS Form 8938?
FATCA Form 8938 is a relatively new form that is designed to provide the IRS with information regarding your foreign accounts, income and assets. Technically, the form is required to be filed in disclosing “specified foreign assets” for individuals who meet the threshold requirements.
It is directly linked to FATCA reporting (Foreign Account Tax Compliance Act) and since FATCA compliance and enforcement is a top priority for the U,S, Government, it is very important that annual 8938 filing requirements are strictly adhered to.
Threshold Requirements – Form 8938?
Unlike the FBAR which has a one-size-fits-all, more than $10,000 minimum filing requirement, Form 8938 varies depending on various factors.
At the most basic level, a person does not have to file an 8938 unless they have $50,000 in qualifying assets (an aggregate total) on the last day of the year, or if they have less than $50,000 on the last day of the year, than they still have to file the form if they had $75,000 in qualifying assets (an aggregate total) anytime during the year.
This is the baseline reporting requirement, and whether or not a person has to file is impacted by whether they are married filing jointly, married filing separate, residing inside the United States, or residing in a foreign country.
Form 8938 Penalties
The failure to file this form comes with steep penalties, ranging as high as $10,000 per violation with a cap of $50,000. If a person has form 8938 filing requirement, chances are they also have an FBAR filing requirement (not all types of foreign accounts have to be included on both forms). Therefore, these penalties can quickly multiply and result in a complete forfeit of the foreign account balances.
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Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.
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