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What is Form 8938? As part of the introduction of the FACTA legislation, the IRS has created a new form, Form 8938 – Statement of Specified Foreign Financial Assets.
When is Form 8938 required?
Form 8938 is required when:
1) the highest balance of your foreign financial assets amount to more than $ 300,000.
2) the balance of your foreign financial assets is more than $ 200,000 as of 31 December of the relevant tax year.
These thresholds apply to US taxpayers living abroad who use the filing status “Single” or “Married Filing Separately”. For American taxpayers living in America as well as for other filing statuses, other thresholds apply.
If you meet the conditions of Form 8939, you must send this form with your American tax return.
Specify accounts, shares and investments
On Form 8938, you must declare not only your financial accounts, but also shares/ investments held with a non-US person, interests in foreign entities, financial instruments or contracts where the counterparty is a non-US person (e.g. bank notes, bonds, debentures or claims issued by a foreign person, interest in a foreign trust or inheritance).
There are many areas that may apply to US taxpayers who live abroad and have their own possessions that could trap people who are not 100% aware of what should be disclosed.
With this you must bear in mind that, for example, foreign property owned by an American should not be reported on Form 8938, but if this property is held through a foreign entity, such as a company, partnership, trust or inheritance, it should be reported.
Form 8938 and fines
Incorrect compliance or reporting of your foreign financial interests can be penalized by the IRS with a fine of at least $ 10,000 You can even be criminally prosecuted if there is fraud.
Form 8938 no FBAR form
Finally, this form should not be confused with the FBAR form. These forms do not differ very much from each other, but there are differences and these are clearly indicated on the following IRS site: https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements
Questions about Form 8938?
If you have any questions you can contact Americans Overseas. Two dual nationals living abroad founded Americans Overseas. In the costly and exhausting process of finding the right experts, they realised they had not only accumulated a mountain of knowledge, but also built up a solid network of tax and legal experts. This could be of great benefit to others in similar situations.
Please do not hesitate to contact Americans Overseas free of charge and free of obligations.