What is IRS Form 8938?
Form 8938 is also known as the "Statement of Specified Foreign Financial Assets," is a critical document that U.S. taxpayers use to report certain foreign financial assets to the IRS. This form is a key component of the Foreign Account Tax Compliance Act (FATCA), which aims to prevent tax evasion by U.S. taxpayers holding assets in foreign accounts.
Filing Form 8938: Requirements and Penalties for U.S. Taxpayers Living Abroad
For U.S. taxpayers residing abroad, the filing requirements and thresholds for Form 8938 are slightly different to accommodate their unique financial situations.
Definition of Living Abroad:
- You are considered to live abroad if you are a U.S. citizen whose tax home is in a foreign country and you have been present in a foreign country or countries for at least 330 days out of a consecutive 12-month period.
Single or Married Filing Separately:
- If you are not married or file separately from your spouse, you must file Form 8938 if the value of your specified foreign financial assets exceeds $200,000 on the last day of the tax year or more than $300,000 at any time during the year.
Married Filing Jointly:
- The thresholds for those filing jointly are higher, requiring you to file if the value of your specified foreign financial assets exceeds $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
Specified Foreign Financial Assets:
- These include foreign bank accounts, investment accounts, and other foreign financial assets that must be reported.
Penalties for Non-Compliance
For taxpayers living abroad, the penalties for failing to file Form 8938 are equally stringent:
- Initial Penalty: A penalty of $10,000 for failure to file each annual report.
- Continued Failure: An additional penalty of up to $50,000 for continued failure to file after IRS notification.
- Underpayment Penalty: A 40% penalty on any understatement of tax attributable to non-disclosed foreign financial assets.
- Criminal Penalties: Willful failure to file may lead to criminal charges, which can result in fines and imprisonment.
Additional Resources
Understanding and meeting these reporting thresholds is essential for compliance and to avoid hefty fines. For further details, the IRS provides comprehensive guidelines and examples on their official website.
For more detailed information, you can visit the IRS Summary of FATCA Reporting for U.S. Taxpayers. This resource provides an extensive overview of FATCA (Foreign Account Tax Compliance Act) reporting requirements, including examples and additional clarifications to help you navigate your tax obligations effectively.
Della Torre Law, PLLC