Yesterday, I discussed the Report of Foreign Bank and Financial Accounts, or FBAR, as it concerns U.S. government reporting requirements for offshore safe deposit boxes.
I mentioned the following section on the Internal Revenue Service FBAR info page:
U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938…
Today, I want to talk more about Form 8938.
Here’s what the rest of that section said:
Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.
Let’s go to the IRS Foreign Account Tax Compliance Act web page. Here’s what it states:
Foreign Account Tax Compliance Act
The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.
FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts
FATCA focuses on reporting:
-By U.S. taxpayers about certain foreign financial accounts and offshore assets
-By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which
-U.S. taxpayers hold a substantial ownership interest
-The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.
There’s more information for “Individuals,” “Financial Institutions,” and “Governments.” Under “Individuals”:
U.S. individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold.
Form 8938 reporting is in addition to FBAR reporting.
A linked page, “FATCA Information for Individuals,” states:
U.S. citizens, U.S. individual residents, and a very limited number of nonresident individuals who own certain foreign financial accounts or other offshore assets (specified foreign financial assets) must report those assets
-Use Form 8938 to report these assets
Attach Form 8938 to the annual income tax return (usually Form 1040)
Taxpayers with a total value of specified foreign financial assets below a certain threshold do not have to file Form 8938
-If the total value is at or below $50,000 at the end of the tax year, there is no reporting requirement for the year, unless the total value was more than $75,000 at any time during the tax year
-The threshold is higher for individuals who live outside the United States
-Thresholds are different for married and single taxpayers
Taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets.
Penalties apply for failure to file accurately
FBAR? Form 8938? FATCA? A lot to digest, right? Not to worry. All of this should be clearer for readers by the time I’m done blogging on the subject of U.S. government reporting requirements as it relates to offshore safe deposit boxes.
By Christopher E. Hill
Offshore Safe Deposit Boxes (www.offshoresafedepositboxes.com)