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FATCA Form 8938

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Taxpayers are required by law to disclose their foreign assets, accounts, and financial investments. Form 8938 is filed by US taxpayers for clear disclosure of such funds, in addition to your standard tax return, and both serve to satisfy FATCA requirements. Form 8938 directly relates to the IRS’ Statement of Specified Foreign Financial Assets, which are filed by US Persons who hold FATCA Assets that are reportable to the IRS in line with Internal Revenue Code section 6038D. Historically, the government has been combating a lack of foreign asset reporting and compliance since the introduction of the Foreign Account Tax Compliance Act. As discussed in this article, the FBAR is reported to FinCEN, not the IRS. FACTA stipulates reporting foreign accounts and assets through Form 8938 to the IRS. Though the two are similar, that is the distinction.

Foreign Financial Institutions, or FFIs, are also required to report US asset holders to the IRS to ensure full disclosure. Form 8938 is to be sent with your regular US tax returns, and failure to submit the form could result in severe penalties. However, like with the FBAR, there are programs offered by the IRS to help minimize or dodge penalties, and you will hear these referred to as “offshore voluntary disclosure.”

Form 8938 Thresholds

The limitations for the various thresholds within Form 8938 depend on your residency and marital status. Here is a break-down of the different thresholds for filing Form 8938:

Taxpayers living in the United States.

  • If you and your current spouse file jointly, you meet the threshold for reporting only if the total worth of your specified foreign accounts exceeds $100,000 on the final day of the relevant tax year, or over $150,000 at any point within the tax year.

  • If you are single or married, but file an income tax return separate from your spouse, you meet the threshold for reporting only if the total worth of your specified foreign accounts and assets exceeds $50,000 on the final day of the tax year, or more than $75,000 at any point within the tax year.

Taxpayers living outside the United States. 

  • If you are single or married filing separately, you meet the reporting threshold only if the total worth of your specified foreign accounts and assets exceeds $200,000 on the final day of the specified tax year, or above $300,000 at any point during the tax year.

  • If you and your spouse file jointly, you meet the reporting threshold only if the total worth of your disclosed foreign accounts and assets is greater than $400,000 on the final day of the tax year or above $600,000 at any point within the relevant tax year.

Typical examples of assets reported on Form 8938 include foreign savings accounts, foreign trusts, foreign retirement plans, foreign life insurance policies and plans, foreign corporate accounts, foreign mutual funds, and any foreign bank accounts that meet the provided thresholds. To comprehensively decide if your foreign account should be disclosed on Form 8938, contact Dimov Tax & CPA Services and let our team of foreign asset experts take a look at your unique financial situation. Dimov Tax will help you file the correct forms in a timely manner, and ensure that all assets are properly disclosed.

Form 8938 due dates vary as well. US residents should submit the form in April alongside their standard income taxes. Foreign Residents have until June to submit Form 8938, and October extensions can be requested. In special situations, arrangements can be made for a December extension. Again, consult a tax professional like Dimov Tax for personally tailored assistance with foreign asset disclosure.

In regards to penalties, here is the IRS’ exact language and disclosure of fees:

“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.”

Late Filing Exceptions 

Penalties may be curbed or limited due to “reasonable cause,” however this last resort is strictly limited by the IRS. Exact rules and circumstances are not blatantly defined by the IRS, and claiming reasonable cause is difficult and confusing. If, let’s say, you relocate from a country that legally prohibits giving your own financial data to a different government, this is not a justifiable exception to filing Form 8938. You will need to consult with a professional tax service, ideally one that specializes in foreign asset management. 

For personalized assistance with navigating Form 8938, or to accurately verify which threshold is relevant to you, contact Dimov Tax & CPA Services today! Their experienced team of professional CPAs can help you distinguish between similar forms and find the best and most efficient way to file your taxes! Leave it to the professionals at Dimov Tax to sort through the fine print and get your taxes filed easily!


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