The (New) Form 8938 Reporting Requirements Explained 2023

Form 8938

Form 8938 

Each year, the US Government requires US Taxpayers who own foreign assets, investments and accounts to disclose this information on Internal Revenue Service Form 8938 — in addition to filing a US Tax Return — to comply with FATCA. Technically speaking, Form 8938 refers to the IRS’ Statement of Specified Foreign Financial Assets filed by US Persons with FATCA Assets that are reportable to the Internal Revenue Service in accordance with Internal Revenue Code section 6038D. With the introduction of the Foreign Account Tax Compliance Act, the U.S. Government stockpiled even more ammunition in the Government’s fight against foreign account and asset noncompliance. FATCA requires U.S. Taxpayers to disclose their “specified foreign financial assets” directly to the IRS on Form 8938 — unlike the FBAR, which is reported to FinCEN. The 8938 Form also requires FFIs (Foreign Financial Institutions) to report U.S. account holders to the IRS. More than 110 countries have entered into FATCA Agreements (IGAs) with the U.S., which is nearly double the number of foreign countries that have entered into bilateral double income taxation treaties with the U.S. Form 8938 is due to be filed at the same time a person files their U.S. tax return (including extensions). The failure to file the form timely or completely may result in penalties. To reduce or avoid these penalties the IRS has developed several amnesty programs, collectively referred to as offshore voluntary disclosure.

We have prepared a summary explaining the basics of Form 8938, who has to file, and when.

Form 8938 Threshold & Requirements

U.S. Taxpayers who meet the Form 8938 threshold and are required to file a tax return will also be required to include specified foreign asset reporting with their tax return. The threshold requirements will vary based on U.S. residency vs. non-U.S. residency — along with the Taxpayer’s filing status.  It is important to note that Form 8938 is not the same as the FBAR (FinCEN Form). Some people may have to file both the Form 8938 and FBAR; some are only required to file one of the forms, and some taxpayers have no FBAR or Form 8938 requirements.

*There are many assets that you would probably not consider “foreign assets,” but may need to be reported anyway.

Form 8938 Threshold Filing Requirements

The threshold for filing the forms is determined based on:

• • • U.S. Resident vs. Non-Residents status; and

    • Filing Jointly vs. Separate or Unmarried

Joint Income Tax Return (U.S. Residents)

• • • 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.

Unmarried or Separate Tax Return (U.S. Residents)

• • • 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.

Unmarried or Separate Tax Return (Non-U.S. Residents)

• • • 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.

 Joint Income Tax Return (Non-U.S. Residents)

• • • 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.

Foreign Financial Asset Definition 

There are many different types of specified foreign financial assets that may need to be reported to the IRS Form. While there are some exceptions, exclusions and limitations that apply — it is a pretty comprehensive list.

Here are some common 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

8938 Form Filing Deadline

The Due Date for FATCA Reporting is the date your tax return is due to be filed.

For individuals, the Form 8938 due dates, include:

• • • April (U.S. Residents)

    • June (Foreign Residents)

    • October (Extension)

    • December (Special Circumstance extension)

Late Filing Form 8938 Penalties

The penalties for Form 8938 can be severe.

 As provided by the IRS:

• • • “Beginning with the 2011 tax year, a penalty for failing to file Form 8938 reporting the taxpayer’s interest in certain foreign financial assets, including financial accounts, certain foreign securities, and interests in foreign entities, as required by IRC § 6038D.

    • The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.”

Reasonable Cause Exception to Late Filing

While Reasonable Cause may limit penalties, the IRS limits the ability to claim reasonable cause: While the IRS refuses to clearly identify what specific facts and circumstances will qualify for reasonable cause, 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 country’s law is not sufficient to meet the reasonable cause standard. 

• • • “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.”

Form 8938 FAQ (Questions & Answers)

Here are some other common questions we receive:

Why is Form 8938 Important to the IRS?

The purpose of Form 8938 is to keep the IRS updated and current on a U.S. person’s offshore and foreign income, assets, investments, and accounts – this is very important to the IRS

Is the Form included in TurboTax?

Yes. Unlike other international forms, the 8938 is included with most TurboTax software.

Have there been any major changes to the Form?

No major changes. 

Are Closed Accounts Reported as Well?

Yes, at least for a limited time.

For example, if you closed an account in 2019, you report it in 2020, but it is not reported in the subsequent year(s).

What if I already included Foreign Income on Schedule B?

It does not matter.

You still have to complete an 8938 form as well, even if you have filed Schedule B.

What if I do Not Actually Own the Money or Asset?

Technically, you only file the 8938 when you have an interest in the asset.

Therefore, whether or not you have any interest in the money is important (vs. simply having your name or signature authority on the account).

As provided by the IRS:

“Unless an exception applies, you must file Form 8938 if you are a specified person (either a specified individual or a specified domestic entity) that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold.

Report Foreign Gift on Form 8938?

Generally, the answer is “No.”

Rather, you would file a form 3520, BUT, if the gift is a foreign asset, you may have to report it on both forms.

Report Foreign Business on Form 8938?

This is a bit of a trickier answer.

Whether or not you file Form 8938 for a particular business is impacted by whether you meet the threshold for filing a Form 5471 or 8865 for the same asset.

Comparison of FBAR vs 8938 (IRS Chart)

The IRS developed the FBAR vs 8938 graph to assist taxpayers. The Internal Revenue Service prepares its own graph to compare the two forms, which may be of assistance to you. It has been reproduced below for you:

*Note – This table is current through the publication date. Please check the instructions for each form for information regarding any future developments.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure and Form 8938.

Contact our firm today for assistance with getting compliant.