IRS Form 8938 Threshold

IRS Form 8938 Threshold

IRS Form 8938 Threshold

While there are many different international information reporting forms that a U.S. Taxpayer may have to file, Form 8938 has become one of the most common. IRS Form 8938 refers to the reporting of Specified Foreign Financial Assets in accordance with Internal Revenue Code Section 6038D. Form 8938 is a component of FATCA (Foreign Account Tax Compliance Act). And, while Form 8938 is similar to the FBAR — it has its own set of requirements and headaches. Most notably, the United States has entered into more than 110 FATCA agreements across the globe, in which hundreds of thousands of Foreign Financial Institutions across the world report U.S. account holders to the U.S. government so that they can ensure taxpayers are properly reporting their account values and corresponding income. What makes Form 8938 a bit difficult for taxpayers is that the various threshold requirements depend on whether the taxpayer resides in the United States or abroad — along with whether or not the taxpayer files their tax returns as an individual/MFS vs Married Filing Jointly. Let’s look at six (6) common examples for taxpayers who have specified foreign financial assets and are required to file Form 8938.

*Originally published by Golding & Golding in 2019, Updated in 2024. We have additional resources about Form 8938 in general, including our 10 Form 8938 Key Facts to Know and 5 Common Form 8938 Errors, published in 2021 and updated in 2024.

Single Taxpayer Living in the U.S.

      • The taxpayer is a us person who was originally from a foreign country and still maintains assets in those countries. She has a relatively straightforward tax return but she has $90,000 in foreign accounts and investments with the maximum value of $90,000 in the year. Since the maximum total annual aggregate value exceeds $75,000 on any day of the year or $50,000 on the last day of the year, Taxpayer has to file Form 8938.

Single Taxpayer Living Abroad

      • The taxpayer is a U.S. citizen who lives overseas. She has been accumulating assets and has about $160,000 in foreign bank accounts and investment accounts abroad. Since Taxpayer lives in a foreign country the threshold requirements are different. Because the total value of the Taxpayer’s foreign accounts do not exceed $200,000 on the last day of the year or $300,000 on any other day of the year, the Taxpayer is not required to file Form 8938. Presumably, she is required to file the FBAR and may also have a Form 8621 filing requirement for her foreign mutual funds.

Married Taxpayer Living in the U.S.

      • Taxpayers reside in the United States and file joint returns each year. One spouse has foreign accounts with an annual aggregate total of $130,000 on the last day of the year, while the other taxpayer does not have any foreign accounts. In this situation, taxpayers have more than $100,000 on the last day of the year in foreign accounts and therefore required to file form 8938.

      • Since taxpayers file their tax returns jointly the foreign accounts are listed on the joint return even though only one spouse owns the account. In addition, if for any reason the taxpayers are penalized, these types of penalties are joint and several amassed against the return so that even the taxpayer who does not have ownership of the accounts may still be on the hook for penalties

As provided by the IRS: 

        • 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. Your and your spouse’s liability for

Married Taxpayer Living Abroad

      • Taxpayers are U.S. citizens who live overseas. Combined between them, they have foreign accounts that at one point in the year reached $500,000 but on the last day of the year had $350,000. In this type of situation, taxpayers and not required the file Form 8938. That is because at no time during the year did the accounts exceed $600,000 on any day of the year and the accounts have less than $400,000 on the last day of the year. Therefore, even though taxpayers had a substantial amount of money in their foreign accounts – they are not required to file form 8938.

Form 1040 vs 1040-NR

      • The taxpayer is a US person who is not considered a U.S. person on the last day of the year and filed a form 1040-NR. Since taxpayers only have to file a form 8938 for the portion of the year in which they are considered a U.S. person for tax purposes, if during the time period the taxpayer was considered a US person for tax purposes they did not meet the form 8938 filing requirement then they are not required to file a Form 8938 if the only reason they would have to do so was because they met the Form 8938 filing requirement during the portion of the year that they were considered a non-resident – as long as they filed the proper paperwork on form 1040NR/8833

Substantial Presence Test

      • For individual taxpayers who are only required to file U.S. tax returns because they meet the substantial presence test, it is important to note that they only have to consider the time that they were a resident of the United States and were considered a US person for tax purposes for Form 8938 filing purposes.

      • For example, the taxpayer comes to the United States in May and meets the substantial presence test for that year. In in determining whether they meet threshold requirements for having to file Form 8938 the dates begin in May (when the residency began).

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

This resource may help taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure

Contact our firm today for assistance.