A New US Expat Tax Requirement: Form 8938Feb 12 • Categorized as Foreign Bank Account Reporting
Many American expatriates find themselves confused by the US Expat Tax filing requirements, and for good reason! Not only does the IRS require you to file US expat taxes if you have earned over the relatively low thresholds, you are also required to report assets located overseas via the FBAR. And now, the IRS recently introduced yet another filing requirement: Form 8938. This form is similar to another filing requirement, Form TD F 90-22.1 (FBAR), which is filed with the U.S. Department of the Treasury. Form 8938 is in place to ensure that income earned from investments abroad are reported on your US expat tax return, as well as highlight any red flags the IRS may find in your US tax return. The IRS has different filing requirements for Form 8938. These thresholds are based on your filing status and your residency both in the United States and your host country.
US Expat Tax Requirement: Form 8938
Those individuals who are residents in the United States, but have assets located overseas, are going to have lower thresholds than US citizens living abroad. For example, a single taxpayer living in New York would need to file Form 8938 with his/her tax return if they have assets of over $50,000 located overseas. That threshold is doubled for married taxpayers who are also resident in the United States.
For those same individuals, the requirement to file Form 8938 changes when their returns become expat tax returns. The thresholds for a single filer living outside the United States is $150,000 at any given point of the year, or more than $100,000 at the end of the tax year, it is higher for married couples filing jointly. These higher values are permitted in order to give expatriates the chance to save money abroad for retirement and afford big-ticket items such as the down payment on a home.
Form 8938 Vs. FBAR
Many expatriates will no doubt make the incorrect assumption that filing Form 8938 with their US expat taxes will replace their obligations to file Form TD F 90-22.1 (FBAR) with the U.S. Department of the Treasury. Form 8938 is not designed to replace the FBAR reporting requirements. If you need to file Form 8928, you will most certainly need to file the FBAR with the U.S. Department of the Treasury as the IRS thresholds are much higher than those for the FBAR. That said, just because you need to file the FBAR does not necessarily mean that you will need to file Form 8938 with the IRS.
Form 8938 is to be submitted to the IRS with your US expat tax return on tax day for the given tax year. The FBAR, on the other hand, is sent to the U.S. Department of the Treasury, separate from your US expat tax return and must be delivered by June 30th each year.
Like all US expat tax filing requirements, the IRS does have penalties in place for failure to comply with the new filing requirements. The IRS can size up to 40% of undisclosed assets, and enforce penalties of up to $50,000. If you are unsure if you need to file Form 8938 with your US expat taxes we strongly recommend that you seek expat tax help.