- 1 IRS Form 8938 Filing Requirements
- 2 Is IRS Form 8938 Filed Separately from the 1040?
- 3 Is IRS Form 8938 Difficult?
- 4 What is a Specified Foreign Financial Asset?
- 5 What are the Threshold Filing Requirements?
- 6 Form 8938 Penalties
- 7 Reasonable Cause Limitation
- 8 We Specialize in IRS Voluntary Disclosure
- 9 Golding & Golding, A PLC
IRS Form 8938 Filing Requirements – When is Form 8938 Required?
The purpose of Form 8938 just to ensure that U.S. persons (both those that reside in the United States as well as those that reside abroad) timely and properly report their specified foreign financial assets to the IRS.
Form 8938 is a relatively new IRS reporting form that was developed in accordance with FATCA (Foreign Account Tax Compliance Act).
Common questions we receive about Form 8938 Filing Requirements:
- When is the form 8938 due to be filed?
- Is form 8938 hard to complete?
- How much do I have to have in foreign assets?
- Do I file it if I live overseas?
- What if I never filed the form?
- What are Form 8938 penalties?
- How can I avoid Form 8938 penalties?
IRS Form 8938 Filing Requirements
The filing requirements for form 8938 will vary based on whether a person files their U.S tax returns as single/married filing separate (MFS) or Married Filing Jointly (MFJ) and whether or not the person resides in the United States, or is considered a foreign resident.
Is IRS Form 8938 Filed Separately from the 1040?
No. Unlike other international reporting forms such as four 5471 or form 8865, form 8938 is it part of your actual tax return and is included in software you may have from TurboTax or other vendors. The other forms indicated here are filed with your tax return but oftentimes they have to be filed even if you do not have to file a U.S. Tax Return. The form 8938 is not filed unless you also file a tax return.
Is IRS Form 8938 Difficult?
Form 8938 is not terribly difficult, as much as it is a nuisance. It requires the disclosure of various information regarding your foreign Financial assets, including the income that is generated from the account, as well as other identifying information, such as:
- Was the account/asset opened/acquired this year?
- Was the account/asset closed/sold this year?
- Is the account/asset owned with a spouse?
- Did the account/asset generate any income?
What is a Specified Foreign Financial Asset?
The IRS does not really provide a great in-depth summary about how to define what a specified foreign financial asset is (and it is not updated to reflect current assets types such as virtual currency).
Here are some common specified foreign financial assets that we come across in our practice (our practice is devoted exclusively to foreign assets, income, account, and an investment disclosure):
- Foreign Bank Accounts
- Foreign Investment Accounts
- Foreign Mutual funds
- Foreign Life Insurance
- Foreign Pensions
- Foreign Stock ownership
- Foreign Business ownership
- *Foreign Lockboxes
- *Virtual Currency
*This is a case-by-case analysis and strategy.
What are the Threshold Filing Requirements?
Not everybody with specified foreign financial assets will have to file the form. There are four different threshold requirements:
Single or Married Filing Separately in the United States
Aggregate total of all specified foreign assets of $50,000 on the last day of the year. Or, if you have less than $50,000 on the last day of the year but more than $75,000 on any other day of the year, you still have to file.
Single or Married Filing Separately Foreign Resident
Aggregate total of all specified foreign assets of $200,000 on the last day of the year. Or, if you have less than $200,000 on the last day of the year but more than $300,000 on any other day of the year, you still have to file.
Married Filing Jointly in the United States
Aggregate total of all specified foreign assets of $100,000 on the last day of the year. Or, if you have less than $100,000 on the last day of the year but more than $150,000 on any other day of the year, you still have to file.
Married Filing jointly Foreign Resident
Aggregate total of all specified foreign assets of $400,000 on the last day of the year. Or, if you have less than $100,000 on the last day of the year but more than $600,000 on any other day of the year, you still have to file.
Form 8938 Penalties
Form 8938 penalties will vary, depending on your particular facts and circumstances. You may even be able to obtain a penalty waiver using Streamlined Foreign Offshore Procedures or Reasonable Cause (if the IRS agent is feeling friendly) and avoid being penalized upwards of $60,000 (for multiple years of non-compliance)
Reasonable Cause Limitation
While the IRS refuses to clearly identify what specific facts and circumstances will qualify for reasonable cost, they are quick to include a major hurdle for you in trying to qualify reasonable cause… and the limitation does not seem very reasonable.
For example, if you come from a country in which exposing your own financial information to another government (such as the United States) would be illegal in that foreign country – that will not justify failing to comply with form 8938 requirements.
In fact, the IRS has specifically stated that the above referenced example of violating your own countries law is not sufficient to meet the reasonable cause standard. As provided in Form 8938 Instructions, Page 9, “Effect of foreign jurisdiction laws: The fact that a foreign jurisdiction would impose a civil or criminal penalty on you if you disclose the required information is not reasonable cause.”
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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.