Form 8938 Penalty
Form 8938 Penalty: If a U.S. Taxpayer files the 8938 Form late to report foreign assets – or does not file at all – they may become subject to IRS Form 8938 penalties. This form is referred to as a FATCA Form 8938 Penalties.
FATCA is the Foreign Account Tax Compliance Act. Taxpayer file a Form 8938 with their 1040 tax return.
The Form 8938 is one of the most common, since it is filed as part of your tax return.
In general, a U.S. person is required to report offshore accounts, assets, and investments to the Internal Revenue Service on various international reporting forms, such as the FBAR, and PFIC Form 8621.
The failure to report timely and accurately may result in offshore penalties.
These penalties can be oftentimes be abated with FATCA amnesty programs.
IRS Penalizes Undisclosed Foreign Assets
The Form 8938 penalty involves the late or unfiled FATCA reporting of Form 8938. The penalties will varym, depending on each filer’s particular facts and circumstances.
A person may even be able to obtain a penalty waiver using Streamlined Foreign Offshore Procedures, Delinquency Procedures, or Reasonable Cause — and avoid being penalized upwards of $60,000 (for multiple years of non-compliance)
As provided by the IRS:
“You may be subject to penalties if you fail to timely file a correct Form 8938 or if you have an understatement of tax relating to an undisclosed specified foreign financial asset.”
Failure-To-File Form 8938 Penalty
If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), you may be subject to a penalty of $10,000.
Continuing Failure-to-File Form 8938
If you do not file a correct and complete Form 8938 within 90 days after the IRS mails you a notice of the failure to file, you may be subject to an additional penalty of $10,000 for each 30-day period (or part of a period) during which you continue to fail to file Form 8938 after the 90-day period has expired.
The maximum additional penalty for a continuing failure to file Form 8938 is $50,000.
Sometimes, Reasonable Cause is an effective tool to reduce, avoid or abate Form 8938 Penalties. As provided by the IRS:
“No penalty will be imposed if you fail to file Form 8938 or to disclose one or more specified foreign financial assets on Form 8938 and the failure is due to reasonable cause and not to willful neglect. You must affirmatively show the facts that support a reasonable cause claim.
The determination of whether a failure to disclose a specified foreign financial asset on Form 8938 was due to reasonable cause and not due to willful neglect will be determined on a case-by-case basis, taking into account all pertinent facts and circumstances.”
Limitation on 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.
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.”
Other Offshore IRS Penalties
Beyond form 8938, oftentimes if a person has foreign financial assets, they will have several other forms they may need to file, and the failure to file these forms may result in additional offshore fines and penalties.
Offshore Voluntary Disclosure is an effect method for mitigating penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Form 8938 Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.