What is The IRS Form 8938 Threshold?

IRS Form 8938 Threshold

IRS Form 8938 Threshold

IRS Form 8938 Threshold: When a U.S. Person Taxpayer has specified foreign financial assets, they may have to file an annual IRS Form 8938. The threshold requirements will vary depending on the filing status of the person (Married or Single/Married Filing Separate) and residence (U.S. or Foreign). Form 8938 is filed with your tax return and requires much more detail and data regarding Foreign Income.

FATCA Reporting & Form 8938

Form 8938 was introduced as a result of FATCA (Foreign Account Tax Compliance Act) and IRC 6038D.  It is part of a tax return and is used by US Persons to report foreign accounts, assets and investments to the Internal Revenue Service. While the form is similar to the FBAR, it is much more detailed than the FBAR, and requires additional reporting requirements such as:

• The currency and exchange rate used
• If the account/asset earned any income
• The type of income generated
• Whether the asset/account is owned with a spouse
• Whether the asset/account was opened in the current year
• Whether the asset/account was closed in the current year

Form 8938 Threshold Requirements for Individuals

The threshold filing requirements vary, as follows:

Taxpayers Living In The United States

There are two main thresholds for individuals living in the United States.

As provided by the IRS:

Unmarried Taxpayers Living in the US.

• • • 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 Filing 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 a Separate Income Tax Return or Filing Single

• • • 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 filing 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 Example.

Married Taxpayers Filing a Joint Income Tax Return (Foreign Resident)

• • • 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 a Separate Tax Returns (Foreign Resident)

• • • 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.

Form 8938 Threshold Requirements – Domestic Entity

• • • 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.

Form 8938 Penalties

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.

Presumption of Maximum Value

• • • If the IRS determines that you have an interest in one or more specified foreign financial assets and asks you for information about the value of any asset, but you do not provide enough information for the IRS to determine the value of the asset, you are presumed to own specified foreign financial assets with a value of more than the reporting threshold that applies to you. See Determining the Reporting Threshold That Applies to You, earlier. In such case you are subject to the failure-to-file penalties if you do not file Form 8938.

Reasonable Cause Exception

• • • 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-base basis, taking into account all pertinent facts and circumstances.

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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