201904.04
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Form 8938 Reporting – Year-End Balance vs. High-Balance Example

Form 8938 Reporting – Year-End Balance vs. High-Year Balance Rules (Golding & Golding)

Form 8938 Reporting – Year-End Balance vs. High-Year Balance Rules (Golding & Golding)

Form 8938 Reporting – Year-End Balance vs. High-Year Balance Rules

Form 8938 Reporting: Taxpayers with a high-year balance may sill have to file an 8938 to report foreign financial assets, even if their year-end balance is below reporting thresholds.

Form 8938 Reporting – It is Part of your Tax Return

Unlike other forms, such as a form 3520, which you file (if you meet the reporting threshold) whether or not you have to actually file a tax return – the 8938 is different.

Form 8938 part of your return, so you only file the form in a year in which you actually have to file a tax return.

Form Who Files Form 8938?

Form 8938 is required for Taxpayers who are actually required to file a tax return, and meet the threshold requirements for filing.

Unlike the FBAR, in which a U.S. person only has to file when they meet the threshold requirement (even if they do not have to actually file a tax return) – Form 8938 is required only when the tax return is filed.

If I meet the Threshold, but do Not have to File a tax Return?

Then you do not have to file a Form 8938 in that year. You may have other filing requirements, such as 3520, 3520-A, 5471, 8865, etc.

Form 8938 Reporting Requirements

Reporting requirements vary based on:

  • U.S. Residence vs. Foreign Residence
  • Marital Status
  • Filing Status

Taxpayers living in the United States

As provided by the IRS:

Unmarried Taxpayers

Unmarried Taxpayers have a lower reporting threshold requirements.

If You are Not Married


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.


Married Taxpayers Fling a Joint Income Tax Return


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 


Married Taxpayers Filing Separate Income Tax Returns


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.


Taxpayers Living Outside the United States


If your tax home is in a foreign country, you meet one of the presence abroad tests described next, and no exception applies, file Form 8938 with your income tax return if you satisfy the reporting threshold discussed next that applies to you.


Unmarried Taxpayers


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.


Married Taxpayers

The threshold requirements are higher for married taxpayers who file jointly.

Married Taxpayers Fling a Joint Income Tax Return


 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.


Married Taxpayers Filing Separate Income Tax Returns


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 $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.


Presence Abroad


You satisfy the presence abroad test if you are one of the following. • A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.


A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported.


Reporting Thresholds Applying to Specified Domestic Entities


If you are a specified domestic entity, 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.


Understanding the Reporting Thresholds – Example

Let’s looks at Married Filing Jointly, and residing in the U.S. Spouses or partners who file jointly may have to file in two separate thresholds:

More than $100,00K on the Last Day of the Year

Example: Joe and Michelle have $140,000 in specified foreign financial assets on the last day of the year.

Result: They have to file

More than $170,00K  During the Year but $45,000 on the Last Day of the Year

Even if Joe and Michelle only had $45,000 on the last day of the year, if they had $170,000 at anytime during the year, they still have to file, even if the values was less than $100,000 on the last day of the year.

What if You do Not File the Form


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 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


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.


Married Taxpayers Filing a Joint Income Tax Return


 If you are married and you and your spouse file a joint income tax return, the failure to file penalties apply as if you and your spouse were a single person. You and your spouse’s liability for all penalties is joint and several.


Non-Compliance with U.S. Tax Law

Whether it is because you did not you had to report foreign accounts, thought you were below the threshold for filing, did not realize non-bank accounts were required to be reported, and/or have other unreported income, accounts, investments or assets – we can help.

What Can You Do?

Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.

4 Types of IRS Voluntary Disclosure Programs

There are typically four types of IRS Voluntary Disclosure programs, and they include:

Contact Us Today; Let us Help You.

International Tax Lawyers - Golding & Golding, A PLC

International Tax Lawyers - Golding & Golding, A PLC

Golding & Golding: Our International Tax Lawyers practice exclusively in the area of IRS Offshore & Voluntary Disclosure. We represent clients in 70 different countries. Managing Partner, Sean M. Golding, JD, LL.M., EA and his team have represented thousands of clients in all aspects of IRS offshore disclosure and compliance during his 20-year career as an Attorney. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo and various Law Journals nationwide.

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, and has also earned the prestigious Enrolled Agent credential. Mr. Golding is also a Board Certified Tax Law Specialist Attorney (A designation earned by Less than 1% of Attorneys nationwide.)
International Tax Lawyers - Golding & Golding, A PLC