Form 8938: Specified Foreign Financial Asset Reporting

This week’s post from our CPA guest blog series focuses on IRS Form 8938.  It comes to us from Alison N. Dougherty, a Senior Manager in tax at Aronson LLC. She assists U.S. taxpayers with U.S. tax reporting and compliance for offshore assets and foreign accounts. http://www.aronsoncompany.com/

 

The Form 8938 Statement of Specified Foreign Financial Assets is a disclosure that U.S. individual taxpayers file with their U.S. Federal Form 1040 individual income tax returns. There is a $10,000 penalty that applies for the failure to file the Form 8938 in a timely manner. The filing requirement was implemented beginning with the tax year 2011 following the enactment of the Foreign Account Tax Compliance Act (“FATCA”) in 2010. FATCA is designed to improve U.S. reporting of offshore assets and foreign Accounts. The U.S. Treasury Department and the IRS issued new final regulations (T.D. 9706) effective on December 12, 2014 regarding the reporting of specified foreign financial assets.

A U.S. individual who lives in the United States must report foreign assets with an aggregate value that exceeds $50,000 USD on the last day of the tax year or $75,000 USD at any time during the tax year. U.S. individuals who are married filing jointly and who live in the United States must report foreign assets with an aggregate value that exceeds $100,000 USD on the last day of the tax year or $150,000 USD at any time during the tax year. The Form 8938 filing thresholds are increased for U.S. individuals who live outside the United States.

The following types of specified foreign financial assets are reportable on the Form 8938.

  1. Any financial account maintained by a foreign financial institution including a financial institution organized under the laws of a U.S. possession
  2. Stock issued by a foreign corporation
  3. A capital or profits interest in a foreign partnership
  4. A note, bond, debenture or other form of indebtedness issued by a foreign person
  5. An interest in a foreign trust or estate
  6. An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap or similar agreement with a foreign counterparty
  7. Any option or other derivative instrument with respect to any of the items listed above or with respect to any currency or commodity that is entered into with a foreign counterparty or issuer
  8. Foreign retirement plan and pension accounts
  9. Insurance policies or annuities with a cash surrender value
  10. An interest in a foreign mutual fund, hedge fund and private equity fund
  11. Specified foreign financial assets owned by a U.S. or foreign disregarded entity

The following assets are not reportable on the Form 8938.

  1. An asset held in a financial account maintained by a foreign financial institution since the account itself is already reportable
  2. Foreign real property held directly
  3. Foreign real property held through an entity that is not disregarded
  4. Indirect interests in foreign financial assets held through an entity that is not disregarded
  5. Domestic mutual funds investing in foreign stocks and securities
  6. Foreign currency, precious metals or collectible personal property such as art, antiques, jewelry or cars held directly
  7. Social security program benefits provided by a foreign government

 

Alison N. Dougherty
Senior Manager
Aronson LLC
805 King Farm Blvd, Suite 300
Rockville, MD 20850
adougherty@aronsonllc.com
Direct Line (301) 231-6290
Main Line (301) 231-6200
Fax (301) 231-7630