Americans’ Interests in Foreign Accounts Reportable on Form 8938
Posted on: December 15, 2018 | By: Stephen Dunn | Delinquent International Information Return Submission Procedures, Form 8938, International Information Returns, Uncategorized
The United States taxes its citizens and residents on their worldwide income. Accordingly, the U.S. Internal Revenue Code requires U.S. taxpayers whose interests in foreign financial accounts exceed certain thresholds to report those interests in foreign financial assets on Form 8938, Report of Specified Foreign Financial Assets, filed with their annual U.S. income tax return. The U.S. Bank Secrecy Act requires U.S. taxpayers whose interests in foreign financial accounts exceeds $10,000 at any time during the calendar year to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts, (“FBAR”), for that calendar year.
Form 8938 and FBARs report much the same information. Reportable information includes the name and address of the financial institution, the account number, and the high balance of the account for the calendar year.
Significant penalties may be assessed for failure to file Form 8938. More importantly, the assessment statute of limitations as to a tax return—the entire tax return, not just the penalty for failure to file an information return—is suspended until Forms 8938 and like information returns due from the taxpayer have been filed.
A separate article will address FBARs.
Who Must File Form 8938?
An unmarried individual resident of the United States must file Form 8938 if his aggregate balance of foreign financial assets exceeds $75,000 on any day of the year, or $50,000 on the last day of the year. A married couple resident of the United States who file a joint income tax return must file Form 8938 if their aggregate balance of foreign financial assets exceeds $150,000 on any day of the year, or $100,000 on the last day of the tax year.
An unmarried individual nonresident of the United States must file Form 8938 if his aggregate balance of foreign financial assets exceeds $300,000 on any day of the year, or $200,000 on the last day of the year. A married couple resident of the United States who file a joint income tax return must file Form 8938 if their aggregate balance of foreign financial assets exceeds $600,000 on any day of the year, or $400,000 on the last day of the tax year.
“Foreign financial asset” includes—
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Financial accounts maintained by a foreign financial institution; and
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The following foreign financial assets if they are held for investment
and not held in an account maintained by a financial institution:
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stock or securities issued by someone that is not a U.S. person;
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Any interest in a foreign entity; and
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Any financial instrument contract that has an issuer or counterparty that is not a U.S. person.
A financial asset is a “foreign” financial asset is maintained with a foreign financial institution. It excludes a financial institution maintained with a U.S. office or branch of a foreign financial institution.
A “U.S. person” is a citizen or resident of the U.S., or a domestic (U.S.-based) corporation, partnership, estate, or trust. “Resident of the U.S.” means a lawful permanent resident of the U.S. (“green card” holder), or an individual who satisfies the substantial presence test. An individual satisfies the substantial presence with respect to any calendar year (hereinafter in this subsection referred to as the “current year”) if-
(1) such individual was present in the United States on at least 31 days during the calendar year, and
(2) the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier determined under the following table) equals or exceeds 183 days:
In the case of days in: The applicable multiplier is:
The current year |
1 |
The first preceding year |
1/3 |
The second preceding year |
1/6 |