Do I have to file Form 8938?
Form 8938 must be filed by US taxpayers with certain types of foreign financial assets if they are valued over a certain limit. Thresholds vary based on filing status and whether the taxpayer lives in the US or abroad.
What triggers the need for Form 8938?
The requirement for Form 8938 is triggered when a US individual, such as someone living in Dubai, holds non-US financial accounts and cash assets. The IRS requires information on the value of these assets for two reasons:
- Determining Form 8938 Filing: The need to file Form 8938 is based on exceeding the filing threshold, see below.
- Recording on the FBAR: The Foreign Bank and Financial Accounts Report (FBAR) reports your annual highest balance and year-end balance of all your non-US financial accounts.
What are the filing thresholds to file Form 8938?
- For Single Filers: You need to file Form 8938 if your cash assets exceed $300,000 at any time during the year or $200,000 at the end of the year.
- For Joint Filers: The threshold doubles to $600,000 at any point during the year or $400,000 at the end of the year.
What assets count towards the filing threshold?
When calculating your total, include:
- Bank accounts outside the US
- Cash assets
- Stocks and shares
- Crypto
- Overseas pension and retirement accounts
- Exclusions from the Threshold
US-based assets like 401k or IRA are not included in this calculation.
Not sure if you need to file Form 8938?
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Is there a penalty for not filing Form 8938?
- Failure to File: Not filing Form 8938 on time can result in a penalty of $10,000.
- Additional Penalties: Depending on the circumstances, there may be other penalties.
When does Form 8938 need to be filed?
File Form 8938 along with your federal tax return Form 1040 – typically due April 15. For US people living abroad, there is an automatic extension to June 15.
Can I get a further filing extension for Form 8938?
Yes, an IRS Federal filing extension (Form 4868) will cover Form 8938 and need to be filed before April 15 for those living in the United States or filed before June 15 for those living outside the United States.
I haven’t been filing Form 8938—how do I avoid the penalties?
If you’re living outside the United States, learn about the IRS Streamlined Tax Amnesty program here.
Understanding when and how to file Form 8938 is crucial for US individuals with foreign financial assets. Keeping track of the value of these assets and being aware of the filing thresholds based on your filing status and residency can help avoid hefty penalties.
It’s not just about the value at the end of the year but also the highest balance at any point during the year. A tax professional will help you stay informed and compliant with these requirements, allowing you to progress smoothly.
Aya Takriti, an IRS Enrolled Agent with 12 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East. *Schedule a consultation with Aya today.
*30-minutes US$247.
