Form 8938 is the form used to specify and report foreign financial assets. The total value of all the specified assets should be more than the appropriate reporting threshold. Reporting thresholds vary from one individual with foreign financial assets to another.

  •  If you live in the US and you are unmarried and 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 taxpayers that are filing a joint income tax return attest that the reporting threshold of their total value of their assets 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 taxpayers filing separate returns satisfy that the total value of their 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.
  •  For taxpayers living outside the US; after meeting tax obligations from their home country and a no exception applies, a Form 8938 should be filled out with all the details of the income tax return after satisfying the reporting threshold for unmarried, married applying for joint income tax returns and married applying for separate income tax returns.
  •  Specified Foreign Financial Assets are any of the following: financial accounts maintained by a foreign financial institution, stocks or securities issued by a non-US resident, any interests in a foreign entity and any financial instrument with a non-US issuer or party. Other specified foreign financial assets are stocks issued by a foreign corporation, capital or profits interest in a foreign partnership, notes, bonds or other indebtedness issued by a non-US resident, an interest in a foreign trust or foreign estate, an interest in rate swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap or other similar activities with a non-US resident.
  •  Assets not requiring any reports are the following: certain financial accounts such as US mutual funds accounts, IRAs, Section 401 retirement accounts, qualified US retirement plans, brokerage accounts maintained by US financial institutions and financial account maintained by a dealer or trader.
  • Any financial assets that are not held in a financial account if the asset is subject to the mark-to-market accounting rules for dealers in securities or commodities.
    Here are some strategies on how to make your foreign financial asset filing more efficient.

  1. .Remember to keep all your bank receipts and all supporting documents handy in case of an audit.
  2. When do you actually file and how do you file it? While accomplishing your annual return, attach Form 8939 and file this by the due date for the return. An annual return includes Form 1040 and Form 1040NR. Never send a Form 8938 to the IRS if it is incomplete; it should be attached to an annual return or an amended return.
  3. In determining the total value of your specified foreign financial assets can be determined using several techniques:
    • The value of a foreign financial asset based on its market value. Foreign currency should be converted to US dollars by applying the appropriate foreign currency exchange rate.
    • Another way is by determining the total value of your assets using the maximum value of your interest in the foreign trust.
    • Still another way to determine the value of your foreign assets especially when you receive no distributions during the tax year, the value of zero should be placed as interest. Same goes with an asset with no positive value; zero should be placed as value of the asset.
    • For assets in another form, these should be reported as well and the reporting threshold followed.
    • For joint assets, the value that you use to determine the total value of all your assets depends on whether your spouse is the owner and whether you file a joint or separate tax return.
  4.   Be sure to seek professional tax filing help if you are unsure of your returns. Errors, omissions and missed deadlines are subject to severe penalties and could also lead to an audit. By using a professional tax filer through an individual or a company, you will certainly reduce any mistakes that you could be done by a novice tax filer and of course save you from payments and penalties.
    If you are new to foreign financial asset filing or you have questions then you should check out the IRS resource for Form 8938 at http://www.irs.gov/pub/irs-pdf/i8938.pdf.