Purpose:
Form 8938 is used to report certain foreign financial assets to the IRS, ensuring transparency and compliance with U.S. tax laws.
Foreign financial assets include:
- Foreign bank accounts
- Investments and financial deals not in a bank account which include stocks or bonds, ownership in foreign businesses and financial contracts.
Reporting period & filing deadline:
Report assets for the calendar year from January 1st to December 31st.
File form 8938 each year by April 15 along with your tax returns. You can submit it either online or by mail with your regular tax documents.
The extended deadline for form 8938 along with your tax returns is October 15.
Who Must File:
U.S. citizens and resident aliens must file form 8938 if their foreign assets exceed certain thresholds, which vary based on their filing status and whether they live in the U.S. or abroad.
* Resident aliens – Foreign-born, non-U.S. citizen who lives in the U.S.
Types of Reporting Thresholds:
Single or married filing separately:
- Living in the U.S - Report if the foreign assets exceed $50K at year-end or $75K anytime during the year.
- Living abroad - Report if the foreign assets exceed $200K at year-end or $300K anytime during the year.
Married Filing Jointly:
- Living in the U.S - Report if foreign assets exceed $100K at year-end or $150K anytime during the year.
- Living abroad - Report if the foreign assets exceed $400K at year-end or $600K anytime during the year.
Penalties for non-compliance:
- If you miss filing form 8938 when required, the IRS imposes a failure-to-file penalty of at least $10K. This initial penalty applies if you miss the due date or submit incomplete or incorrect information.
- If you fail to address the IRS notice, you could incur an additional $10K penalty for every 30 days you remain non-compliant, with a maximum limit of $50K.
Criminal penalties:
- In addition to the penalties mentioned, failing to file form 8938, not reporting an asset, or underpaying taxes can lead to criminal penalties.
- If you underpay your taxes due to fraud, you’ll face a 75% penalty on the amount underpaid and could also face criminal charges.