Form 8938 – Requirements and Penalties for US Expats
Your US expat tax filing may undergo revisions and updates to cope up with the IRS requirements. Enough and accurate information on the guidelines set by the Treasury Department will be a great advantage for your tax compliance. In particular, foreign asset reporting through Form 8938 needs certain attention and understanding on your part.
Who are Required to Submit Form 8938?
The Statement of Specified Foreign Financial Assets or Form 8938 is an important part of your US expat taxes. There are certain thresholds which will determine if this is indeed necessary on your part or not. Other factors that will determine eligibility are foreign financial assets and filing status.
The following conditions will require you to submit form 8938:
- A single taxpayer with foreign assets exceeding of $50,000.
- Married couple who lives in the US and filing a joint tax return whose foreign assets exceed $100,000 on the last day of the tax year or $150,000 at any time during the year.
- Dual citizens with foreign assets above $400,000 on the last day of the tax year or $600,000 at any time during the year.
If you fall under any of the specified conditions above, it means you have to file Form 8938 and your FBAR. Form 8938 does not replace this tax form requirement. Not all who file FBAR will have to file Form 8938.
What are Included in the Instructions for Form 8938?
Specific requirements for filing of Form 8938 are included in the Instructions. It also identifies the type of assets considered as foreign financial assets and must be included in the Form.
Other information included in the Instructions are:
- Procedures on how to accomplish and submit the form
- Time periods for reporting and filing
- Excepted specified domestic entities
- Determining the total value of your specified foreign financial assets
- Interests in specified foreign financial assets
- Specific instructions
- Special rules and examples
What Penalties are Associated with Non-filing of Form 8938?
You may know already the strict policies IRS imposes when it comes to failure to file tax forms and tax payments. Like any penalties, the severity of the penalties IRS may require will depend on certain factors.
The basic fine when you fail to file Form 8938 is $10,000. Continuous failure to file this form despite notifications from IRS raises the penalty up to $50,000. Aside from these values, any understatement or non-disclosure of assets will result in a 40% penalty.
Even with this information, the real deal is the application. Even if you comply, mistakes can be time-consuming and costly. What more can non-compliance of foreign asset reporting result to? Remember that even if you completely, accurately, and promptly filed Form 8938, you still have to accomplish FBAR Form or FinCEN 114.
Being knowledgeable and faithful in accomplishing and submitting these forms will provide greater advantages.