Instructions for Filling Out Form 8938

This article offers a concise overview of Form 8938, "Statement of Specified Foreign Financial Assets," and its filing requirements. It is designed for individuals and entities who need to report foreign financial assets to the Internal Revenue Service (IRS) under section 6038D of the Internal Revenue Code.

In this article, we'll provide information on Form 8938 and a step-by-step guide on how to fill it out, keeping it straight to the point.

What is Form 8938?

Form 8938, "Statement of Specified Foreign Financial Assets," is a document used to report specified foreign financial assets to the Internal Revenue Service (IRS) if the total value of these assets exceeds the appropriate reporting threshold. The purpose of this form is to comply with section 6038D of the Internal Revenue Code.

Specified individuals and domestic entities must file Form 8938 if they have an interest in specified foreign financial assets and the value of those assets surpasses the applicable reporting threshold, which varies depending on the taxpayer's filing status and residency. Assets that must be reported include financial accounts maintained by foreign financial institutions and other foreign financial assets held for investment not in an account maintained by a financial institution. Failure to file or report specified foreign financial assets can result in penalties.

Who Must File Form 8938?

Form 8938 must be filed by specified individuals and specified domestic entities. Specified individuals include U.S. citizens, resident aliens of the United States for any part of the tax year, nonresident aliens who elect to be treated as resident aliens for filing a joint income tax return, and nonresident aliens who are bona fide residents of American Samoa or Puerto Rico. Specified domestic entities are certain domestic corporations, partnerships, and trusts that meet specific criteria related to holding specified foreign financial assets.

Form 8938 Tax Filing Deadlines and Due Dates

• Form 8938 is generally attached to an annual return and filed by the due date (including extensions) for that return.
• The specific due date depends on the type of tax return being filed, such as Form 1040 for individuals or Form 1120 for corporations.
• Extensions granted to the filer may also affect the due date for Form 8938.

Form 8938 Late Payment Penalty

There is a "Failure-To-File Penalty" for not submitting a complete and correct Form 8938 by the due date (including extensions). This penalty is $10,000, and if the failure continues for more than 90 days after the IRS mails a notice of the failure to file, an additional penalty of $10,000 for each 30-day period (or part of a period) may be imposed, up to a maximum of $50,000.

Step-by-Step Instructions for Form 8938

Here are the step-by-step instructions for filling out Form 8938:

1. Before You Begin: If you have reported all of your specified foreign financial assets on other forms like Form 3520, 5471, 8621, or 8865, you do not need to report them again on Form 8938. However, you must complete Part IV of Form 8938.
2. Identifying Information (Lines 1-4): Provide your name(s) and taxpayer identification number (TIN) as shown on your annual return. Indicate the type of filer (specified individual, partnership, corporation, or trust) and provide additional identifying information as required.
3. Part I - Foreign Deposit and Custodial Accounts Summary (Lines 5-9): Summarize information about your foreign deposit and custodial accounts, including the number of accounts, their total maximum value, and whether any accounts were closed during the tax year.
4. Part II - Other Foreign Assets Summary (Lines 10-12): Summarize information about other specified foreign financial assets, including the number of assets, their total maximum value, and whether any assets were acquired or disposed of during the tax year.
5. Part III - Summary of Tax Items Attributable to Specified Foreign Financial Assets: Enter tax items such as interest, dividends, royalties, and other income attributable to your specified foreign financial assets.
6. Part IV - Excepted Specified Foreign Financial Assets: Indicate if you have reported specified foreign financial assets on other forms and therefore do not need to report them again on Form 8938.
7. Part V - Detailed Information for Each Foreign Deposit and Custodial Account Included in the Part I Summary (Lines 20-28): Provide detailed information for each foreign deposit and custodial account, including the account number, maximum value, and other relevant details.
8. Part VI - Detailed Information for Each "Other Foreign Asset" Included in the Part II Summary (Lines 29-36): Provide detailed information for each other specified foreign financial asset not held in a financial account, including a description of the asset, its maximum value, and other relevant details.

These instructions are designed to help filers accurately report their specified foreign financial assets and comply with the Internal Revenue Code.

How to Submit Form 8938

To submit Form 8938, attach it to your annual return and file by the due date (including extensions) for that return. Specify the applicable calendar year or tax year to which your Form 8938 relates in the appropriate space(s) at the top of the form. Do not send a Form 8938 to the IRS unless it is attached to an annual return or an amended return.

Keep in mind that you must report the maximum value during the tax year of each specified foreign financial asset reported on Form 8938. Use the U.S. Treasury Bureau of the Fiscal Service foreign currency exchange rate for purchasing U.S. dollars for foreign currency conversion, or another publicly available foreign currency exchange rate if no U.S. Treasury rate is available. Penalties may apply if you fail to timely file a correct Form 8938 or if you have an understatement of tax relating to an undisclosed specified foreign financial asset.

However, no penalty will be imposed if the failure to file or disclose is due to reasonable cause and not to willful neglect. If you do not include in your gross income an amount relating to one or more specified foreign financial assets, and the amount you omit is more than $5,000, any tax you owe for the tax year can be assessed at any time within 6 years after you filed your return.

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