Am I required to report my foreign financial assets to the IRS?
In 2010, Congress enacted The Foreign Account Tax Compliance Act (FATCA), which requires U.S. taxpayers, whether living abroad or in the United States, who own financial assets outside of the United States and meet the filing requirements listed below, to report the fair market value of those assets on an annual basis to the IRS. The assets are reported on the new IRS Form 8938 which is submitted with the taxpayer’s income tax return.
FATCA also requires foreign financial institutions, such as banks, insurance companies, mutual funds and brokers/dealers to report certain information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
I am living overseas. When must I file Form 8938, Statement of Specified Foreign Financial Assets?
Individuals who are required to report their foreign assets to the IRS under FATCA on the Form 8938 currently include:
• U.S. citizens
• any non-citizen who meets the substantial presence test
• a non-resident alien who makes an election to be treated as a resident alien for purposes of filing a joint tax return, and
• a non-resident alien who is a bona fide resident of American Samoa or Puerto Rico.
If you are a taxpayer living abroad:
• You are filing a return other than a joint return and
The total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year.
• You are filing a joint return and
• the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
Which types of foreign assets are reportable?
How do I determine the total value of my specified foreign financial assets?
The taxpayer must report the maximum fair market value for the taxable year of their foreign financial assets converted to US dollars. To convert to US dollars, the taxpayer will use the end of the taxable year exchange rate.
If I file the Form 8938, Statement of Specified Foreign Financial Assets, do I still have to file the Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)?
Yes. If the filing requirements for the FBAR are met, you are still required to file the FBAR in addition to Form 8938. The Form 8938 does not replace the FBAR.
When is the Form 8938 due?
The Form 8938 is due by the due date, including the extended due date, if applicable, of your income tax return. It is filed together with you income tax return.
What are the penalties if I do not comply with the filing requirements?
The taxpayer can be penalized up to $10,000 for their failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. In addition, criminal penalties may also apply.