8938 Form 2022 Printable, Fillable PDF – Among those that utilize IRS 8938 Form are some individual and corporate taxpayers, as well as companies, partnerships, and trusts that have overseas assets in excess of a specific threshold. It must be submitted with your yearly tax return if it is required to be done so.
If you or your organization has any foreign assets, it’s critical to understand if you need to submit 8938 Form and how to complete it correctly and completely.
What Is IRS Form 8938 And How Do I Use It?
A new form, 8938 Form, was created as part of the Foreign Account Tax Compliance Act of 2002 (FATCA). This legislation, which was signed into law by President Obama on March 18, 2010, tightens the reporting requirements for taxpayers with overseas assets and reduces the amount of money the government loses as a result of offshore tax evasion. The 8938 Form must be filed by taxpayers, companies, and partnerships having foreign assets equal to or in excess of the threshold amounts when they submit their taxes.
Unlike foreign assets kept in foreign investment accounts maintained in the United States, foreign investments held in U.S.-based investment accounts are not subject to FATCA reporting requirements.
What Counts As A Foreign Financial Asset In The United States?
Foreign financial assets, or “specified foreign financial assets,” as the Internal Revenue Service refers to them, include the following:
- Banking, investment, retirement, and deferred compensation plans held at financial institutions located outside of the United States are all examples of foreign financial accounts.
- Investment securities such as stocks, bonds, and other assets issued by a non-U.S. person are not held in an investment account.
- Notes or bonds issued by a foreign person or entity.
- Any ownership stake in a foreign entity, such as a foreign business, a foreign partnership, or a foreign estate or trust, is considered a foreign interest.
- Any financial instrument or contract with an issuer or counterparty who is not a U.S. person is considered a non-U.S. financial instrument or contract.
- The exemption applies to personal dwellings and rental properties that are owned by a foreign partnership, company, trust, or estate only.
Who Is The Intended User Of Form 8938?
Technically, all taxpayers in the United States are liable for FATCA, but only under certain conditions. According to the instructions for IRS 8938 Form, there are “specified persons” and “specific domestic entities,” and the instructions clarify when reporting is necessary for each.
The term “specified people” refers to individuals who are U.S. citizens or permanent residents of the United States, as well as nonresident aliens who opt to be classified as permanent residents for tax purposes and nonresident aliens who live in American Samoa or Puerto Rico.
The filing of 8938 Form is not necessary for taxpayers who do not have to file tax returns because they earn less than the income filing requirements—which is the same as the standard deduction for most non-dependents as of 2020—and so do not have to submit the form.
Individuals who own stock in a company or partnership that is “closely held” are considered to be specified domestic entities.
- On the final day of the fiscal year, a single individual has 80 percent of the company’s voting power, shares, and capital.
- 50% of its gross revenue comes from passive income, or 50% of its assets are kept for the purpose of generating passive income, whichever is greater.
For the purposes of this tax year, a domestic trust that has at least one identified current beneficiary for the tax year in question may be considered.
Thresholds For Submitting Form 8938
Taxpayers must also meet specific criteria in order to be compelled to submit 8938 Form, in addition to these requirements. The Internal Revenue Service has established various standards for different sorts of taxpayers. All of them represent the total amount of foreign assets acquired.
- The 8938 Form needs to be filed by unmarried persons living in the United States if the market value of their overseas financial assets is higher than $50,000 on the final day of the year or greater than $75,000 at any point during the year.
- If the market value of their overseas financial assets is greater than $100,000 on the final day of the year or greater than $150,000 at any point during the year, married people filing jointly and living in the United States are required to submit 8938 Form.
- If the market value of their overseas financial assets is greater than $50,000 on the final day of the year or greater than $75,000 at any point during the year, married people filing separate returns and living in the United States are required to submit 8938 Form.
- The 8938 Form is required to be filed by unmarried individuals residing outside the United States who meet either the bona fide resident or physical presence tests and whose market value of foreign financial assets is greater than $200,000 on the last day of the year or greater than $300,000 at any point during the year.
- 8938 Form is required for married individuals filing jointly who reside outside the United States and meet either the bona fide resident or physical presence tests.
- 8938 Form is required for married individuals filing separately who reside outside the United States and meet either the bona fide resident or physical presence tests.
- The following entities qualify: corporations, partnerships, and trusts that fulfill the above-mentioned standards and have a total value of specified foreign financial assets in excess of $50,000 on December 31st or in excess of $75,000 at any point during the year.
These criteria will be in effect beginning on March 1, 2021.
It is not necessary for taxpayers to submit 8938 Form if the reporting levels have not been fulfilled.
How To Determine The Value Of Foreign Assets
Foreign financial assets are valued at their fair market value in the currency in which they are denominated, rather than their book value. Taxpayers must be aware of the asset’s highest fair market value at any point throughout the year, as well as the asset’s fair market value on the final day of the year, in order to file their returns.
Market values are then translated to U.S. dollars using the currency exchange rate in effect on the last day of the year to arrive at final dollar amounts. Taxpayers should refer to the Bureau of the Fiscal Service’s published currency exchange rates or, if it is not accessible, another publicly available source of information. Taxpayers must describe the foreign currency, the exchange rate utilized, and the source of the exchange rate information, especially if the source is anything other than the Bureau of the Fiscal Service.7. Taxpayers must also mention the amount of foreign currency they are using.
Where Can I Obtain A Form 8938?
8938 Form is available for download from the IRS website, or you may get one from your accountant. Most IRS tax forms are also available in a variety of locations, including libraries, post offices, grocery stores, office supply stores, and print centers. If you do your taxes using online software, such as TurboTax, and you need to submit 8938 Form, the form will often be included automatically when the program detects that you’re obliged to do so.
How To Complete And Understand Form 8938
8938 Form outlines all of the information that must be submitted to the Internal Revenue Service. It is divided into six sections:
- Part I of the form is for financial accounts with a financial institution, such as a deposit or custodial account with them.
- Part II is devoted to various sorts of financial assets, such as stocks, bonds, and other types of investment instruments.
- Part III of the tax return is a summary of where income from overseas financial assets is declared on the tax return and where it is not.
- Part IV of 8938 Form provides a summary of some categories of financial assets that are exempt from reporting on the form because the information is already disclosed elsewhere on the tax return, such as retirement accounts.
- 8. The information you supply in sections I through IV is supplemented by additional information in parts V and VI.8
Comply with the directions for filling out each area, and attach any extra sheets that may be required to explain all of the accounts listed in sections V and VI of the report.
Is It Possible To File Form 8938 Electronically?
If you want to e-file 8938 Form along with the rest of your yearly tax return, you may do so using your preferred tax filing software. Remember to complete it before the tax filing date, which is normally April 15 unless you request an extension.
Residents of Texas and Oklahoma have until June 15, 2021, to submit their tax returns for the calendar year 2020. In response to the devastating winter storms that hit certain areas in February 2021, the Internal Revenue Service issued this extension. 9/10
8938 Form should be sent to the following address:
To file by mail, you should include 8938 Form with your Form 1040, your tax payment, and any other necessary tax forms, all of which should be sent to the IRS processing office for your state and postmarked on or before the annual filing deadline. These mailing addresses may be found on the IRS website. 5
How To Complete And Submit Form 8938
In addition to completing your return electronically, you may print and complete 8938 Form and send it to the IRS together with your other tax documents and payment by the yearly federal tax filing deadline. 8938 Form may also be e-filed with the remainder of your electronic tax return if you want.
Penalties In Connection With Form 8938
Failure to submit 8938 Form by the due date of the tax return, including extensions, or filing an incomplete or incorrect 8938 Form may result in a $10,000 penalty from the Internal Revenue Service.Furthermore, the IRS may impose additional penalties of up to $10,000 for any 30-day period or portion of a 30-day period during which the 8938 Form is not submitted within 90 days after receiving a written notice from the IRS about the failure to file the 8938 Form. In the most severe case, the potential punishment is $50,000.
If a 8938 Form is not submitted and the IRS finds that a taxpayer has one or more foreign financial assets that are required to be reported, the IRS presumes that the foreign financial asset has sufficient value to satisfy the reporting criteria. If a taxpayer can demonstrate that he or she had a justifiable basis for failing to declare an asset on 8938 Form, penalties may be remitted. 12
If you have any overseas assets and are unsure whether you need to submit 8938 Form, you should get advice from a tax specialist.
The Most Important Takeaways
- 8938 Form is used by some U.S. taxpayers and corporations to disclose foreign-held assets in excess of specific thresholds, which vary depending on the filing status of the taxpayer or company.
- It is a component of FATCA, which was enacted by the Obama administration in 2010 in order to combat international tax evasion.
- If you are obliged to submit 8938 Form with your yearly tax return, you must do so before Tax Day, which is often April 15.
- If you satisfy the criteria but fail to submit 8938 Form on time, you might face fines ranging from $10,000 to $50,000, depending on your situation.
- If you have any overseas assets, you may additionally be required to submit an FBAR with the Treasury Department on a separate basis, depending on your circumstances.