If you’re a U.S. taxpayer with financial assets outside the U.S., you may need to file Form 8938 . 🌍📄
This form helps the IRS track foreign financial assets, making sure all your income is properly reported. While it may seem overwhelming at first, we’re here to break it down for you so you can stay compliant and avoid penalties! 🚨
Who Needs to File Form 8938? 🧐
You must file Form 8938 if you meet certain thresholds for foreign financial assets based on your filing status and residency. Here’s a quick breakdown:
U.S. residents:
- Single filers: You must file if the total value of your foreign assets is $50,000 on the last day of the tax year or $75,000 at any time during the year.
- Married filing jointly: File if your foreign assets total $100,000 on the last day of the tax year or $150,000 at any point during the year.
Living abroad? The thresholds are higher:
Note: If you’re living abroad, make sure you meet the presence abroad test to qualify for these higher thresholds. The IRS defines presence abroad as:
- 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 for at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported.
With that in mind, we then focus on the filing status
- Single filers: You must file if the value of your foreign assets is $200,000 on the last day of the tax year or $300,000 at any time during the year.
- Married filing jointly: File if your foreign assets total $400,000 on the last day of the tax year or $600,000 at any point during the year.
It’s important to remember that Form 8938 is separate from FBAR (Report of Foreign Bank and Financial Accounts) with its own filing requirements, so you might need to file both! 😲
What Counts as a Foreign Financial Asset? 💼💰
Not sure what qualifies as a “foreign financial asset”? Here’s a handy list of what you need to report:
- Foreign bank accounts 🏦
- Foreign investment accounts 📊
- Foreign-issued bonds and stocks 📉
- Interests in foreign entities like partnerships, trusts, or estates 🏢
- Foreign mutual funds and pension plans 💹
If it’s a financial asset located outside the U.S., it probably needs to be reported on Form 8938!
What Happens If You Don’t File? 😬
Failing to file Form 8938 or failing to report all your foreign assets can lead to some serious penalties. 🚨 The IRS can charge you $10,000 for failing to file, and the penalties increase up to $50,000 if you don’t file after the IRS sends you a notice.
On top of that, the IRS can impose a penalty of 40% of the under-reported income related to your foreign assets. 😱
How to File Form 8938 📄🖋️
Filing Form 8938 isn’t as complicated as it sounds. It’s filed as part of your annual tax return (Form 1040). You’ll need to include details about each foreign financial account or asset, such as:
- The name and address of the financial institution where your assets are held
- The maximum value of each account during the tax year
- Income generated from these accounts (if any)
If you’ve hired a tax professional, they’ll help you fill out this form correctly and ensure you’re compliant. 👍
When Do You Need to File? 🗓️
You need to submit Form 8938 by the same deadline as your tax return, typically April 15. If you file for an extension, the deadline to file Form 8938 is also extended. Make sure you meet the filing deadline to avoid those hefty penalties! ⏰
How Form 8938 Differs from FBAR 🤔
You might be wondering, “Isn’t this just like FBAR?” Well, not quite! Here are the key differences:
- Form 8938 is submitted to the IRS with your tax return.
- FBAR is filed separately with the Financial Crimes Enforcement Network (FinCEN).
- The filing thresholds for Form 8938 are generally higher than for FBAR, and they depend on whether you live in the U.S. or abroad.
Think of Form 8938 as a more comprehensive version of FBAR, requiring details on a broader range of foreign assets. 📋
Here is a fantastic Comparison of Form 8938 and FBAR requirements from the IRS website
Stay Compliant & Stress-Free ✨
Keeping track of foreign financial assets and meeting filing requirements may seem complicated, but with proper planning and organization, you can easily stay compliant with IRS rules. Filing Form 8938 ensures you’re reporting all your foreign assets correctly and helps you avoid unnecessary penalties. 👌
If you’re not sure if you need to file or you want to avoid mistakes, don’t hesitate to reach out to your tax professional or contact us for expert guidance!
⚠️ This post is current through the publication date.
⚠️ Please check the instructions for each form for information regarding any future developments and specific years:
🔗 All Form 8938 revisions