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Expat Articles » What US Expats Need To Know!

What US Expats Need To Know!
Form 8938 – Statement of Foreign Financial Assets

This article was written by David McKeegan, Greenback Expat Tax Services.
All information was accurate at the time it was written in January 2012.


US expatriate tax return reporting requirements baffle even the most seasoned expats. The requirements are constantly changing and in recent years new asset reporting forms such as the FBAR and now the Statement of Foreign Financial Assets have been added to the reporting requirements. This article will focus on the Form 8938 and what you as a US Expat taxpayer need to know to stay compliant.

What is Form 8938?

Form 8938 or the Statement of Foreign Financial Assets, is a new IRS report that will be filed with your US tax return. Much like the FBAR, the Statement of Foreign Financial Assets is another tool in the IRS’s arsenal to find and prosecute individuals hiding assets overseas. Unlike the FBAR, the Statement of Foreign Assets had different tiers for individuals living abroad, which are much higher than those for individuals living in the US, which should save a good number of US expats from needing to file this form.


Who Needs to File Form 8938?
The filing requirements for Form 8938 depend on the filing status on your expatriate tax return, your residency status both in the United States and your host country, and how much money you have located in bank or financial accounts overseas. The chart below summarizes the value of “Specified Foreign Financial Assets” that trigger the reporting requirement for the different filing status:
 

  If the total value on the last day of the tax year is above: If the total value at any time during the tax year is above:
Unmarried and living in the USA $50,000 $75,000
Married, filing jointly, and living in the USA $100,000 $150,000
Married, filing separately, living in the USA $50,000 $75,000
Unmarried and living abroad $200,000 $300,000
Married, filing jointly, and living abroad $400,000 $600,000
Married, filing separately, living abroad $200,000 $300,000


Note: If you are not required to file a US tax return, then you are not required to file Form 8938 even if you are over the asset limit. Click here to determine if you are required to file an expatriate tax return.


What is a Specified Foreign Financial Asset?
Specified Foreign Financial Assets include the following:

  1. Financial accounts maintained by a foreign financial institution.
  2. Stock or securities issued by someone that is not a US person
  3. Any interest in a foreign entity – such as stock in a foreign corporation or a capital or profits interest in a foreign partnership
  4. Any financial instrument or contract that has an issuer or counterparty that is not a US person (i.e. swaps, options, or derivatives)
  5. Interest in a foreign trust or foreign estate.


Is anything not considered a Specified Foreign Financial Asset?
This is the US Tax code so of course there are exceptions! Certain items are excluded from being considered a Specified Foreign Financial Asset, including:

  1. Foreign Social Security, social insurance or similar programs of a foreign government
  2. Foreign estates, foreign pension plans, and foreign deferred compensation plans may be excluded if you received no distributions during the tax year and do not know or have reason to know based on readily accessible information the fair market value of your interest. In this case you report these assets with a value of $0.00
  3. Financial accounts maintained by a US payer (US financial institution)
  4. Financial accounts held by a dealer or trader in securities or commodities if all of the holding in the account are subject to the mark to market accounting rules
  5. If the assets are already being reported on another IRS form, such as Form 3520, Form 5471, Form 8621, Form 8865 or Form 8891, then you just need to mark this on the Form 8938


How is Form 8938 different from the FBAR?
Form 8938 is an IRS from and does not replace the need to file the FBAR, which is a U.S. Department of the Treasury form. Simply stated, if you need to file Form 8938, you will almost certainly need to file the FBAR Form TD F 90-22.1 with the U.S. Department of the Treasury to meet your US expatriate tax obligations. On the same note, just because you are over the smaller thresholds of the FBAR does not mean you will be required to file Form 8938 with the IRS.

Other differences include to whom these forms are filed; Form 8938 must be filed with the IRS and is due the same date as your US expatriate tax return. Form TD F 90-22.1 (FBAR) must be filed with the U.S. Department of the Treasury by June 30th of the year following the tax year for your expatriate tax return.


Form 8938 Penalties
Like all expatriate tax return filing requirements, there are penalties in place for those who fail to file Form 8938 with the IRS when delivering their expatriate tax return. Failing to report your accounts can result in a $10,000 penalty, with an additional penalty of up to $50,000 for continued delinquency with the IRS. There is also a penalty in place claiming up to 40% of any understated or non-disclosed assets. Do not forget that this does not replace the need to report the FBAR with the U.S. Department of the Treasury; failing to file this report will result in penalties and fines completely unrelated to Form 8938 and the IRS. If you are unsure of how to proceed or need help please contact us to prepare your expatriate tax return.




About Greenback Expat Tax Services

Greenback Expat Tax Services specializes in the preparation of U.S. expat taxes for Americans living abroad. Greenback's CPAs and EAs have decades of specialist experience in U.S. expat taxes. We offer reasonable, flat fee pricing, a simple, hassle-free process, and most importantly, accountants who are experts in the ins-and-outs of expatriate tax returns. For more information on our expatriate tax preparation services, please visit www.greenbacktaxservices.com