If you are married and file a separate income tax return from your spouse, you satisfy the reporting threshold only if the total value of your specified foreign financial assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year. If you are a specified individual (see Specified Individual, earlier), enter the first TIN shown on your income tax return. This is because below a certain level of aggregate asset value of foreign assets, the US person need not file a Form 8938. If you are required to file Form 8938, you do not have to report the following specified foreign financial assets on Form 8938. Copyright © HRB Digital LLC. PenaltiesFraudFraud. Excepted Specified Foreign Financial Assets, later. And, with the IRS taking an aggressive position of matters involving Foreign Account Compliance, it is important to stay compliant. Hereâs what does and doesnât need to be reported on Form 8938 : Confused? Instead, enter your name(s) and taxpayer identification number (TIN) at the top of the form and complete, If you have more than one account or asset to report in, Electronic Federal Tax Payment System (EFTPS), Instructions for Form 8938 - Introductory Material, Specified PersonSpecified IndividualSpecified Individual. This same value is used in determining whether you have met your reporting threshold. Examples of other specified foreign financial assets include the following, if they are held for investment and not held in a financial account. My spouse and I file separate income tax returns, jointly and individually own specified foreign financial assets, and do not live abroad. Connected stock or partnership ownership. You satisfy the reporting threshold of more than $50,000 on the last day of the tax year. If you file Form 8814, you must report any specified foreign financial asset your child owns and include the maximum value of the entire asset. In summary, Form 8938 abatement or Form 8938 amnesty are not truly correct terms to describe the actual law (for defending against Form 8938 penalties). Percentage of passive assets held by a corporation or partnership. Enter the mailing address of the financial institution in which the account is maintained. A trust described in section 7701(a)(30)(E) to the extent the trust or any part of the trust is treated as owned by one or more specified persons under sections 671 through 678 and the regulations. A joint owner of an asset has an interest in the entire asset. The value of a specified foreign financial asset for purposes of determining the total value of specified foreign financial assets in which you have an interest during the tax year or on the last day of the tax year is the asset's fair market value. If you accept cookies, we will place tracking cookies on your machine to personalize and enhance your experience on our website. Your and your spouse’s liability for all penalties is joint and several. You have an interest in specified foreign financial assets in the amount of $46,000 on the last day of the tax year. Participation in a foreign pension will generally require Form 8938, Foreign Bank Account Report (FBAR or FinCen 114), and possibly Form 3520 relating to U.S. owners of foreign … For more information, see Pub. Form 8938 Deadline and Form 8938 Statute of Limitations. Excepted Specified Foreign Financial Assets, later. The account was closed during the tax year. Use the following rules to determine the maximum value to report. Married taxpayers filing separate income tax returns. Golding & Golding, A PLC (2020): LawDog Enterprises - All Rights Reserved - No Legal Advice Intended: This website includes information about legal issues and legal developments.
A domestic partnership is closely held if, on the last day of the partnership’s tax year, a specified individual directly, indirectly, or constructively holds at least 80% of the capital or profits interest in the partnership. Example 9. Do I need to file Form 8938? Generally, an interest in a foreign estate is a specified foreign financial asset that is reportable on Form 8938 if the total value of all of your specified foreign financial assets is greater than the reporting threshold that applies to you. For instance, the U.S.-U.K. tax treaty generally exempts employer contributions and earnings associated with qualifying pension schemes. No. Partnership interests representing at least 80% of the profits interests or capital interests of the partnership, other than partnership interests in the common parent, is owned by one or more of the other connected corporations, connected partnerships, or the common parent. The piece qualifying as a grantor trust has an annual filing requirement on Forms 3520 and 3520-A and may have additional reporting requirements depending on the pension’s underlying investments (e.g., PFIC reporting). I have a financial account maintained by a U.S. financial institution (including U.S. mutual funds, IRAs and 401(K) Plans) that holds foreign stock and securities. Form 8865, Return of U.S. You must also report any specified foreign financial asset that you own individually on your separate Form 8938 and include the maximum value of the entire asset. My spouse and I live abroad and file separate income tax returns. If you failed to file a Form 8938, or filed one that was incorrect, incomplete, or late/delinquent, you are potentially subject to a $10,000 Form 8938 penalty from the IRS for each year of violation. This tax year I sold precious metals that I held for investment to a foreign person. The total value of my specified foreign financial assets does not exceed $49,000 during the tax year. See Foreign Currency Conversion, later, for rules on determining and applying the appropriate foreign currency exchange rate. Example 4. You do not report ownership of shares in a foreign corporation on Form 8938 and you received taxable distributions from the company that you did not report on your income tax return. You satisfy the reporting threshold even though you do not hold any specified foreign financial assets on the last day of the tax year because you did own specified foreign financial assets of more than $75,000 at any time during the tax year. We ask for the information on this form to carry out the Internal Revenue laws of the United States. To understand reasonable cause, it will be helpful to contrast it against the legal concept of negligence. Notice that in neither of the two scenarios above does the US person intend to (or actually) use any of the foreign accounts’ funds for his own benefit. Special rule for general powers of appointment. Failure to File Form 8938: Was It Negligence (Non-Willful) or Reasonable Cause? Foreign Deposit and Custodial Accounts Summary, Part III. Form 8938 is used to comply with this reporting requirement.
Do I need to report it on Form 8938? We represented a client in an 8-figure disclosure that spanned 7 countries. A foreign pension plan typically qualifies as a foreign financial account for the purposes of the FBAR and a specified foreign financial asset subject to FATCA and reporting on Form 8938. If the issuer or counterparty has a mailing address in the United States, you can enter the U.S. mailing address. Examples of these assets that must be reported if not held in an account include: The examples listed above do not comprise an exclusive list of assets required to be reported. FATCA - Foreign Account Tax Compliance Act. 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. The trustee has supervisory authority over or fiduciary obligations with regard to the specified foreign financial assets held by the trust.
Form 8938 (Statement of Foreign Financial Assets), introduced in 2011 as part of the Foreign Account Tax Compliance Act (FATCA), requires taxpayers to report their foreign assets, subject to minimum values, and indicate where the related income is picked up on their tax return. We’ve written about IRS Form 8938, here. For a foreign pension, not only is the account information included, but more specific information such as: Spousal Ownership; Income Generated; Tax Liability; Opening and Closing of … Reasonable cause is a total defense to Form 8938 penalties, and a Form 8938 tax lawyer is best equipped to gather the relevant facts to that determination, and then write the explanatory attachment arguing against Form 8938 penalties.