IRS FATCA Form 8938 – Statement of Specified Foreign Financial Assets

IRS FATCA Form 8938 – Reporting Thresholds

-Single/ Married Filing Separate/Head of House filers- More than $50,000 ($200,000 if living outside the U.S.) on 12/31 of the current or more than $75,000 ($300,000 if living outside the U.S.) at any time in the current tax year. 

-Married Filing Joint filers- More than $100,000 ($400,000 if living outside the U.S.) on 12/31 of the current tax year or more than $150,000 ($600,000 if living outside the U.S.) at any time in the current tax year.

-Living Outside the U.S.- Taxpayers are considered “living outside the U.S.” if they have a Bona Fide Resident (BFR) for the entire calendar year or meet the Physical Presence Test (PPT) that ends in current tax year.

-Reporting vs. Testing- If Jointly Held Assets- with Spouse- reporting threshold testing use ½ the fair value, reporting value use 100% the fair value. 

– Reporting vs. Testing Joint with-out-spouse- reporting threshold testing and reporting value use 100% of the fair value.

Foreign Financial Assets- IRS FATCA Form 8938 Purposes – What is “Foreign?”

IRC Sec. 6038D- Foreign Asset Reporting- Form 8938- Statement of Specified Foreign Financial Assets

Under IRC Sec 6038D- Information with Respect to Foreign Financial Assets- “Foreign” in A Specified ‘Foreign’ Financial Asset is defined as:

(i) any Financial Account maintained by a Foreign Financial Institution, defined under IRC Sec 1471(d)(4) as a financial institution that is not a U.S. entity, such term shall not include a financial institution which is organized under the laws of any possession of the United States.

(ii) A Stock or Security issued by a person other than a U.S. person, (which includes under the laws of a U.S. possession),

(iii) A Financial Instrument or Contract with an Issuer or Counterparty, which is other than a U.S. person (which includes under the laws of a U.S. possession), and

(iv) an interest in a Foreign Entity, defined as any entity that is not a U.S. person.

Where a U.S. possession is defined under IRC Reg 1.6038D-1(5) as the American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands.

A U.S. Person is defined under IRC Sec 7701(a)(30) as a 7701(a)(30)(A) a citizen or resident of the United States, 7701(a)(30)(B) a domestic partnership, 7701(a)(30)(C) a domestic corporation, 7701(a)(30)(D)

-any estate (other than a foreign estate, within the meaning of paragraph (31)), and 7701(a)(30)(E)

-any trust if— 7701(a)(30)(E)(i) a court within the United States is able to exercise primary supervision over the administration of the trust, and 7701(a)(30)(E)(ii) one or more United States persons have the authority to control all substantial decisions of the trust.

What is the FATCA IRS Form 8938 – Due Date

The FATCA IRS Form 8938 is filed with Form 1040, as such the due date of FATCA IRS Form 8938 is the same due date as the individual income tax return Form 1040 that is on or before April 15th of the year immediately following the calendar tax year being reported, that is every succeeding filing tax year.  When Form 4868- Application for Automatic Extension of Time to File a U.S. Individual Income Tax Return- is filed the due date is October 15th of the year immediately following the calendar tax year being reported.

What is a FATCA IRS Form 8938 “Specified” Foreign Financial Asset (SFFAs)

A ‘Specified’ foreign financial assets is:

1) an FBARs and

2) Personally held (not in a foreign account) Foreign Financial Assets:- such as

• i) non U.S. stocks,
• ii) interest (capital or profits) in foreign entities- partnership, corporation or trust/ estate and/ or
• iii) non U.S. issued financial instruments or contracts, i.e. notes, bonds, debentures issued by foreign person or interest rate/ currency/basis/equity/equity index/credit default- swaps, interest rate floor or similar agreements with foreign counterpart, options, or other derivative instruments with foreign counterparty or issuer.

What is not a ‘Specified’ foreign financial asset:

– SFFAs do not include Real estate, cash, foreign currency, art or collectibles, or safety deposit boxes.

Disclosure Requirements for FATCA IRS Form 8938

In addition to FBAR disclosure:

1) Asset description, including

• i) entity/ issuer name,
• ii) entity/ issuer type,
• iii) nationality &
• iv) mailing address,

2) ID #, if applicable,

3) joint owner name,

4) acquisition/ disposition dates,

5) associated income amount/ type,

6) annual maximum functional currency value and

7) 12/31 functional currency value.

Duplicate Reporting for FATCA IRS Form 8938

No FATCA IRS Form 8938 reporting of SFFAs is required if they are already reported on Form(s) 3520, 3520-A, 5471, 8621, or 8865.

No Requirement for FATCA IRS Form 8938

Where no income tax filing Form 1040- U.S. Individual Income Tax Return- requirement, even if threshold testing requirements are exceeded no filing of FATCA IRS Form 8938 is required.

Structure of FATCA IRS Form 8938

FATCA IRS Form 8938 is separated into six parts: Part I- Foreign Deposit and Custodial Accounts Summary FBARs), Part II- Other Foreign Assets Summary (non FBARs), Part III- Summary of Tax Items Attributable to SFFA’s, Part IV- Excepted SFFA’s (under Duplicate Reporting provisions)  Part V- Detailed Information for Each Foreign Deposit and Custodial Account Included in Part I Summary (for FBARs) and Part VI- Detailed Information for Each “Other Foreign Asset” Included in Part II Summary (non FBARs)

Penalties for Failure to File- Non-Willful/ Willful-

FATCA IRS Form 8938 penalties for failure to disclose the required information to U.S. Treasury by the date due, may result in civil penalties for non-willful violations of $10,000 per FATCA IRS Form 8938 per annum, and willful violations the greater of $100,000 or 50% the value of the account and may include criminal prosecution.

Tax Education is a Top Priority

At Protax, we are dedicated to educating our clients. We want them to be kept aware of U.S. tax laws affecting the amount of income tax they will pay, as well as the developing and constantly changing laws of U.S. taxation.

We invest the time and resources to meet with our clients as often as required to ensure maximum optimal tax savings mechanisms are in place.

These highly complex tax filings involve intricate terminology and Internal Revenue Code sections not understood by the majority of CPA practitioners, let alone average taxpayers. Therefore, only competent international tax CPAs should attempt these filings. Protax has an extremely qualified staff on hand year-round and also offers excellent articles on this website that will help explain these intricacies in more detail for U.S. expatriates.

We can advise you as to the applicable tax laws and regulations directly affecting you and we will consult with you on the preparation of your U.S. tax return Form 1040, Form 2555- Foreign Earned Income and Form 1116 – Foreign Tax Credit, as well as any required state tax filings all via electronic communication and the telephone and / or facsimile, where the situation precludes a one-on-one meeting.

Please contact us for a free consultation and for further details.