How to Pay Your Bills Online: A Complete Guide

Introduction

The Overseas Account Tax Compliance Act requires that all foreign accounts, investments, and assets be reported annually using IRS Form 8938. Filing a Statement of Specified Foreign Financial Assets with the IRS is mandatory for US Persons with FATCA Assets that are reportable to the IRS under section 6038D of the Internal Revenue Code. This form must be filed once a year. The United States government now has more excellent tools to combat tax evasion involving offshore accounts and assets, thanks to the passing of the FACTA. U.S. taxpayers are now mandated by FATCA to report their "specified foreign financial assets" directly to the IRS using Form 8938 rather than FinCEN, as was previously the case (due to the FBAR). If you have an account at an FFI and are situated in the United States, you must file IRS Form 8938 to the IRS to let them know. The deadline for your federal tax return and Form 8938 is the same (including extensions).

What Is Internal Revenue Form 8938?

Form 8938 must be submitted if the total value of your overseas financial assets exceeds the levels used for mandatory filing. Fill out this form and send it to the IRS if you're a U.S. citizen residing inside or outside the nation and you have financial holdings in a foreign country that meet specific criteria (IRS)

Who Needs To File?

To get down to brass tacks, Form 8938 must be filed if you are a U.S. taxpayer living outside the U.S. and you own foreign assets with a combined worth of more than $300,000 at any time during the year (or $200,000 on the last day of the year). The maximum combined annual income that a married couple filing jointly is allowed to have is $600,000, while the minimum payment that they can have is $400,000. If you are a U.S. citizen with eligible assets (such as a bank, investment, and retirement accounts) held outside the U.S., you need to pay special attention to the beginning and closing dates of the tax year. A calendar year in the United States runs from January 1 to December 31. Still, other nations (and other forms of foreign stock, interests in foreign organisations, and international financial instruments) have lower minimums.

Form 8938 Reporting Thresholds

Only taxpayers with incomes above specific levels are obliged to file Form 8938. The Internal Revenue Service has set different thresholds for different types of taxpayers. All these offshore holdings add up to: Form 8938 must be filed if the value of a U.S. resident's single foreign financial asset is over $75,000 at any time or over $50,000 on the last day of the year. If, as a married couple filing jointly in the United States, the market value of your overseas financial assets was more than $100,000 on December 31 or more than $150,000 at any point throughout the year, you are required to file Form 8938. If you are a U.S. resident filing a separate return and the market value of your overseas financial assets was more than $50,000 on December 31 or more than $75,000 at any time during the year, you must submit Form 8938.

Reporting Similarities Between The Fbar And Form 8938

Despite these differences, FBAR and Form 8938 have many things in common. The principal among them is that the standards for valuing assets used by the FBAR and Form 8938 are virtually identical. The FBAR and Form 8938, based on statements received throughout the year, require disclosure of the "maximum" value in each foreign account reported for the calendar year. Both forms must be converted to dollars after the calendar year, and the maximum value must be recorded in dollars. Given the preceding, the value stated for international accounts should match across both forms. When used with the FBAR, Form 8938 can raise red flags for an IRS examiner.

Conclusion:

Incomplete or incorrect Form 8938 submissions may result in a penalty of up to $10,000. You have 30 days from the date you received the IRS Notice of Failure to Disclose to file your return or pay a penalty of $10,000, up to a maximum of $50,000. Criminal penalties may also be in play. Furthermore, if the underpayment pertains to a foreign financial asset that was not disclosed, a penalty equal to 40% of the tax underpayment may be applied. It is policy to impose a 75% penalty on any underpayment that can be linked to fraud.