IRS Foreign Asset Reporting Guidelines and US Expat Taxes

Understanding Foreign Asset Reporting and US Expat Taxes

One of the primary challenges with US expat taxes is being knowledgeable of all the additional reporting requirements from the IRS or the Treasury Department. The IRS has specific guidelines for reporting assets overseas on US expat taxes, using FATCA Form 8938. Form 8938 has updated thresholds for expats and what other reporting requirements still exist for Americans with financial accounts or assets overseas.

US Expat Taxes – Form 8938

Form 8938 (Statement of Specified Foreign Financial Assets) is to be filed with your US expat taxes by expats with certain types of financial assets or foreign bank accounts if they are above the applicable threshold. The thresholds vary on filing status.

“Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds. For example, a married couple living in the U.S. and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year.”

For a single taxpayer living in the US, the threshold is $50,000.

These thresholds are higher for those dual citizens or expats who have established residency in a foreign country. For example, if the same married couple mentioned above were Canadian citizens, they would not file Form 8938 unless their assets valued more than $400,000 on the last day of the tax year or, at any given moment, they had more than $600,000 in financial assets overseas.

Note that Form 8938 does not replace the requirements of the FBAR (Form FinCEN 114) which is filed with the US Department of the Treasury. Form 8938 is submitted to the IRS with your US expat taxes; it is a separate reporting requirement. If you are required to file Form 8938, you are also going to need to file the FBAR with US Department of the Treasury (if your assets are in financial accounts). That being said, just because you file the FBAR does not mean you need to send Form 8938 with your US expat taxes.

Form 8938 Penalties

Like most reporting requirements from the IRS or US Department of the Treasury, there are penalties for failing to file Form 8938. Like many penalties from the IRS or the US Department of the Treasury, they are judged on a case-by-case basis and may or may not be enforced to the highest degree.

“Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. Special statute of limitation rules apply to Form 8938, which are also explained in the instructions.”

The filing requirements are relatively straightforward, and are outlined by the IRS in the Form 8938 instructions. The instructions also define what assets are specified foreign financial assets and need to be included in your report. They also outline how to send the form with your US expat taxes.

Like all tax issues, failure to comply or mistakes in reporting can be both time consuming and costly, especially with the penalties that are currently in place. Keep in mind that even if you file Form 8938, you will still be required to file your FBAR Form, otherwise known as FinCEN 114, with the US Department of the Treasury.

Need More Information About US Expat Taxes and Form 8938?

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Originally published in 2011; updated June 17, 2016.