Any asset in a foreign financial institution that exceeds a certain amount needs to be reported to the IRS. Failure to report can lead to a heavy penalty and/or imprisonment. The Foreign Account Tax Compliance Act (FATCA) came into existence in March 2010 to limit tax evasion.
Form 8938 Statement of Specified Foreign Financial Assets is used to report specific foreign financial assets in which the taxpayer has an interest. As FATCA became a law in 2010, most individual taxpayers need to start filing Form 8938 from year 2011.
When to File
Form 8938 should be filed with your income tax return if the aggregate value of your foreign financial assets exceeds $50,000. You will also need to file Form 8938 if you are:
Unmarried: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the tax year.
Married filing jointly: The total value is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.
Married filing separately: The total value is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
When Not to File
If you are not required to file an income tax return, you are not required to file Form 8938 even if your assets exceed the threshold based on your filing status. Even if you are required to file, you do not need to report financial accounts that are maintained by:
- A U.S. payer,
- The foreign branch of a U.S. financial institution, or
- The U.S. branch of a foreign financial institution.
If you are required to file, you will need to attach Form 8938 with your annual return and file it by the due date. For additional information on Form 8938, review Instructions for Form 8938.