While extremely unlikely, a timely-filed Form 8938 could be found so incomplete or inaccurate that it could be treated as a failure to file and subject the US person to Form 8938 penalties. A bank that is examined by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the National Credit Union Administration; A financial institution that is registered with and regulated or examined by the Securities and Exchange Commission; or. It holds financial assets for the account of others as a substantial part of its business. On the last day of the tax year, my spouse and I jointly own a specified foreign financial asset with a value of $90,000. Penalties for failure to timely and correctly file the Form 8938 are, by contrast, not granted on a similar ‘for the asking’ or ‘just this one time only’ basis. For foreign financial assets excepted from reporting, see Assets Not Required To Be Reported, later. The biggest things you should know about Form 8938 are: To get into the nitty gritty of it, if youâre a U.S. taxpayer who lives outside of the U.S. and holds a total combined value of foreign assets worth more than $300,000 at any time during the year (or $200,000 on the last day of the year) you need to report it on Form 8938.
A Form 8938 voluntary disclosure is a filing of an amended or delinquent/late Form 8938 to the IRS. While similar, Form 8938 is different than an FBAR, and you may have to file both. While Form 8938 amendments are rare, there are certain instances in which it might become necessary or at least advisable to amend an original and timely-filed Form 8938 – perhaps the filer receives corrective source documents from the foreign trust, or discovers that his calculations of income (as originally reported) were incorrect.
The Form 8938 statute of limitations (the period of time in which the IRS may assess penalties for noncompliance with this reporting requirement) typically expires 3 years from that April 15th date – or the later date if the due date of the tax return was timely extended. Page Last Reviewed or Updated: 12-May-2020, Request for Taxpayer Identification Number (TIN) and Certification, Employers engaged in a trade or business who pay compensation.
The fact-gathering, analysis, and (ultimately) write-up for IRS review is thus best left to a Form 8938 tax lawyer.
Such a Form 8938 examination can also occur when a person obligated to file the Form 8938 didn’t file the Form 8938 when he or she should have.
.If you are a specified individual (see Specified Individual, earlier) for less than the entire tax year, you only have to report the information for the part of the year that you are a specified individual.. Use Part I to summarize information regarding foreign deposit and custodial accounts reported in all Parts V. Report the number of deposit accounts reported in all Parts V. Report the total maximum value of these deposit accounts. Subscribe to the FATCA News and Information List, Electronic Federal Tax Payment System (EFTPS), e-file for Large Business and International (LB&I), Foreign Account Tax Compliance Act (FATCA), Cash or foreign currency, real estate, precious metals, art and collectibles, Foreign Financial Institution Investment Account, U.S.-Based Financial Accounts (including U.S. mutual funds, IRAs, 401 (k) plans, etc. International Tax Lawyers - IRS Offshore Voluntary Disclosure, Generally, Foreign Pensions are reportable on. Indicate whether any account was opened or closed or any asset was acquired or disposed of during the tax year.
The value of the real estate held by the entity is taken into account in determining the value of the interest in the entity to be reported on Form 8938, but the real estate itself is not separately reported on Form 8938. A domestic corporation described in section 1473(3)(A) or (B), and the regulations issued with respect to those provisions. You are a specified individual if you are one of the following. A trust described in section 7701(a)(30)(E) is not considered a specified domestic entity, provided that all of the following apply. This does not affect any reporting obligations under section 6038D. In short, the reasonable cause defense is beyond the limits of self-advice or self-help – get a professional involved! Form 8938 is due with your annual tax return. See Bona Fide Resident of a U.S. Foreign pension tax and reporting is a common issue we handle. Interesting, the Form 8938 is very similar to the Foreign Bank Account Report (FBAR).
If you do not know or have reason to know based on readily accessible information the fair market value as of the last day of the tax year, the maximum value is the fair market value, determined as of the last day of the tax year, of the cash and other property distributed during the tax year to you as a beneficiary or participant. The foreign currency exchange rate used to convert the value of the account or asset into U.S. dollars. This is because below a certain level of aggregate asset value of foreign assets, the US person need not file a Form 8938.
See Reporting Thresholds Applying to Specified Individuals, earlier. If you filed a late, incomplete, incorrect Form 8938 – or didn’t file one at all – you face significant penalties. If youâre filing a joint return, the thresholds are $600,000 at any time during the year or $400,000 on the last day of the year. Completing this information may reduce the need for the IRS to contact you. Report the maximum value of the entire jointly held account or asset on your Form 8938 filed with your income tax return, regardless of the value of your separate interest in the account or asset. If you are considered the owner under the grantor trust rules of any part of a domestic liquidating trust under Regulations section 301.7701-4(d) that is created under chapter 7 or chapter 11 of the Bankruptcy Code, you do not have to report any specified foreign financial asset held by the part of the trust you are considered to own. An appraisal by a third party is not necessary to estimate the maximum fair market value during the year. For examples of specified foreign financial assets not held in a financial account, see Other Specified Foreign Financial Assets, earlier. As just described, many types of common foreign assets are reportable on both the FBAR and the Form 8938: bank accounts, investment accounts, and retirement accounts. Additionally, for all tax return years beginning from 2011 forward, the failure to file the Form 8938 has the effect of freezing the statute of limitations on the entire tax return.
My spouse has a separate interest in a specified foreign financial asset with a value of $10,000. A closely held domestic corporation that has at least 50% of its gross income from passive income. Golding & Golding, A PLC (2020): LawDog Enterprises - All Rights Reserved - No Legal Advice Intended: This website includes information about legal issues and legal developments. You are first considered to have an interest in property transferred in connection with the performance of services on the first date that the property is substantially vested (within the meaning of Regulations section 1.83-3(b)) or, if you have made a valid section 83(b) election with respect to the property, on the date of transfer of the property. For purposes of determining whether a domestic corporation or partnership meets the passive income or asset test, domestic corporations and domestic partnerships that are closely held by the same specified individual and that are connected through stock or partnership ownership with a common parent corporation or partnership are treated as owning the combined assets and receiving the combined income of all members of that group. Instead, the only way to avoid a $10,000-per-year Form 8938 penalty is making a winning reasonable cause argument. Enter the name of the financial institution in which the account is maintained. Example 10. If the account was opened or closed, or the asset was acquired or disposed of during the year, enter the date of opening and/or closure, or acquisition and/or disposition, as applicable. You may withdraw your consent at any time by deleting cookies. Go to IRS.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements for a chart comparing Form 8938 and FBAR filing requirements.. See Foreign Currency Conversion, later, for rules on determining and applying the appropriate foreign currency exchange rate. To emphasize: the FBAR serves to report foreign financial accounts, not assets as does the Form 8938. If you own an asset jointly with one or more persons, you must report the asset's maximum value as follows. Check the box on line 7c to indicate the type of foreign entity. I have a safe deposit box at a foreign financial institution. If you have an interest in a foreign pension or deferred compensation plan, you have to report this interest on Form 8938 if the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.
Foreign currency is not a specified foreign financial asset and is not reportable on Form 8938. If the maximum value of a specified foreign financial asset is less than zero, use a value of zero as the maximum value of the asset. See Example 1 below, which illustrates the application of this weighted average asset rule. You do not report a foreign pension on Form 8938 and you received a taxable distribution from the pension plan that you did not report on your income tax return. At a bare minimum, reasonable cause requires that the taxpayer have missed no reasonably-apparent clues to his or her obligation, particularly clues that he or she documentably encountered at any point. I filed my income tax return but now realize that I should have filed Form 8938 with my return, what should I do? This is because the IRS’ data systems often automatically assesses penalties for late-filed or amended Forms 8938. Do I have to report the sales contract on Form 8938? Types of Specified Foreign Financial AssetsForeign Financial InstitutionForeign financial institution. If you underpay your tax due to fraud, you must pay a penalty of 75% of the underpayment due to fraud.