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  • Another monetary component to this penalty is the application of 40% surcharge. This addition relates to the underpayment of taxes and unreported foreign financial assets and criminal charges. If you intentionally did not file form 8938, or you’ve been filing it incorrectly, the IRS can prosecute you against criminal offense. In case you are a US resident, single or married but filing separate returns, you will be required to file form 8938 if your foreign financial assets are $50,000 at year-end or $75,000 or more at any time during that fiscal year. You need to attach form 8938 to your form 1040 and file it along with it.

    FATCA form 8938 is filed with an expat tax return and submitted to the IRS . Form 8938 also requires that all valuable assets as well as all financial accounts be listed. The “FATCA” provisions require specified individuals to report ownership of specified foreign financial assets if the total value exceeds the applicable reporting threshold. Form 8938 is due on the date your income tax return is due, including extensions. For FATCA Form 8938, you must report if you have any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the account or assets that need to be reported on your tax return.

    The function of form 8938 is to report foreign financial assets. You need to file form 8938 if you are a specified person or a specified domestic entity with rights/interests in a specified foreign financial asset. Now, every citizen of the USA who is earning more than $10,000 per annum, or holds a specific amount of foreign financial assets comes under the definition of specified persons for the purpose of FBAR reporting/filing form 8938. Non-compliance with the reporting requirements can result in substantial penalties.

    You’ll need to report the maximum value of certain specified foreign financial assets. These include financial accounts in FIIs and certain other foreign non-account investment assets. Only foreign financial accounts from which the proceeds would go directly to the taxpayer and therefore be mandatory information on a US income tax return are required on Form 8938. If you simply have signature authority over a foreign financial account and you have no financial interest in the account, you will not need to report it on Form 8938 and it will not be used to determine your filing threshold.

    If you have foreign assets such as investments, securities or stocks which are not held in a foreign financial institution you will also be required to report this information. If the balance of your foreign financial account is significantly higher than $10K, you will be required to file Form 8938 with the IRS along with your US income tax return. Your requirement to file Form 8938 isn’t limited to financial accounts, however; you are required to report valuable assets, as well.

    When filers have certain specified foreign financial assets, and they meet the threshold requirements for filing under FATCA – the form 8938 becomes another international reporting form the U.S. person may have to include with their tax return. gilti regulations Specified individuals who own specified foreign financial assets, the value of which exceed the applicable reporting threshold, are required to complete Form 8938 as part of their income tax returns. A higher reporting threshold applies to U.S. persons who are overseas residents and file jointly . Account holders would be subject to a 40% penalty on understatements of income in an undisclosed foreign financial asset.

    You are married and filing a joint income tax return and the total value of your specified foreign financial assets is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. Married individuals who file a joint income tax return for the tax year will file a single Form 8938 that reports all of the specified foreign financial assets in which either spouse has an interest. American expat might be required to file Form 8938 if the total value of foreign financial accounts is more than $10,000.

    Understatements of more than 25% of gross income are subject to an extended statute of limitations period, six years. It also requires taxpayers to report financial assets that are not held in a custodial account, i.e. physical stock or bond certificates. For most American expats, the annual filing of their U.S. tax return is not the real issue to worry about – it's the required disclosure reporting! Some of the most draconian IRS penalties are associated with the non-filing or incorrect filing of the various disclosure reports that you need to file if you hold foreign investments, foreign bank accounts, or foreign business interests. Don't risk losing your hard-earned international financial accounts to IRS penalties, work with a tax professional experienced in the international reporting requirements.

    It requires the reporting of foreign financial assets to the IRS, along with the income generated from the assets. Unlike other international information reporting returns, the Form 8938 is due to be filed at the same time a U.S. taxpayer’s Tax Return is due.

    For most American expats, the annual filing of their U.S. tax return is not the real issue to worry about - \ it's the required disclosure reporting! The Foreign Account Tax Compliance Act (“FATCA”) was enacted in 2010 as part of the HIRE Act, and requires that foreign financial institutions report on foreign assets held by their US account holders or be subject to withholding on certain payments. The HIRE Act also includes legislation requiring US persons to report their foreign financial accounts and assets, which is where Form 8938 comes in. US taxpayers now use Form 8938 to satisfy their FATCA reporting obligations by submitting the form with their annual federal income tax return. Since then, the form has been revised and updated – but it is essentially the same.