When is 8938 Required?
Understanding when Form 8938 is required is crucial for individuals and entities with certain types of foreign financial assets. Form 8938, officially known as “Statement of Specified Foreign Financial Assets,” is a reporting requirement under the Bank Secrecy Act (BSA) and the Foreign Account Tax Compliance Act (FATCA). This article delves into the circumstances under which Form 8938 must be filed with the Internal Revenue Service (IRS).
Form 8938 is primarily required when an individual or entity has foreign financial assets that exceed certain thresholds. These thresholds vary depending on the filer’s marital status and country of residence. Here are some key scenarios when Form 8938 is mandatory:
1. Individuals with Foreign Financial Assets: If an individual has foreign financial assets with an aggregate value exceeding $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year, they must file Form 8938.
2. Married Filing Jointly: For married individuals filing a joint return, the thresholds are doubled. Thus, if the total value of their foreign financial assets exceeds $100,000 on the last day of the tax year or $150,000 at any time during the tax year, they must file Form 8938.
3. Married Filing Separately: In cases where individuals are married and file separately, the threshold is $50,000 on the last day of the tax year or $75,000 at any time during the tax year.
4. Non-U.S. Residents: Non-U.S. residents are also required to file Form 8938 if they have foreign financial assets exceeding the specified thresholds.
5. Trusts and Estates: Certain trusts and estates must file Form 8938 if they have foreign financial assets exceeding the applicable thresholds.
It is important to note that the reporting requirements for Form 8938 are separate from, but complementary to, the Foreign Bank Account Report (FBAR). While FBAR is required for individuals with foreign financial accounts, Form 8938 covers a broader range of foreign financial assets, including bank accounts, securities, and certain types of income.
Failure to file Form 8938 when required can result in penalties, which can be quite substantial. The penalties vary depending on the nature of the non-compliance and the amount of the foreign financial assets involved. Therefore, it is essential for individuals and entities to understand when Form 8938 is required and to comply with the reporting obligations to avoid potential penalties.
In conclusion, Form 8938 is required when an individual or entity has foreign financial assets exceeding the specified thresholds. It is crucial to be aware of these thresholds and the reporting requirements to ensure compliance with tax regulations and avoid penalties.
