USCs and LPRs residing outside the U.S. – and IRS Form 8938
By definition, anyone who does not live in the United States will have assets in their home country. Their value and amount may not be significant, but ownership of assets of various kinds is of course routine for all persons.
I have put a number of posts regarding FBARs – foreign bank account reports. See, When does the Statute of Limitations Run Against the U.S. Government Regarding FBAR Filings? and USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms
In addition, IRS Form 8938 is the form where USCs and LPRs (those who are “resident aliens” by definition) must report so-called “specified foreign financial assets.”
These include shares, partnership interests, investment accounts, bank accounts, etc. This reporting requirement started in 2012 for the years 2011 and hence is relatively new.
In addition to the asset type, any income and gains from the sale of the asset must be reported. There are detailed items of information that must be reported on this form.
One of the practical problems taxpayers always have, is making sure their tax return and the information they reported on it and the plethora of forms (such as Form 8938) is “complete and accurate”. A return which is not, is always subject to potential attack by the IRS. See, What could be the focal point of IRS Criminal Investigations of Former U.S. Citizens and Lawful Permanent Residents?
Next, the civil penalties for failing to file IRS Form 8938 is US$10,000 for each violation that can increase to US$50,000 after notification by the IRS. It’s an area you do not want to make a mistake – which can be costly.
The Taxpayer Advocate Report provides a graphical showing of how many taxpayers filed both IRS Form 8938 and the FBAR. The point is that filing one form, does not relieve the USC or LPR from also filing the other form. If they both apply, they both must be filed under the law.
See, 2014 Taxpayer Advocate Report – Re: Expanded Reporting Obligations and IRS Form 8938 (FATCA – specified foreign financial assets)
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April 3, 2014 at 3:03 pm
[…] 2. Duplicate Reporting. FBARs are often duplicate with tax provision reporting – specifically, IRS Form 8938. See,USCs and LPRs Living Outside the U.S. – Key Tax and BSA Forms and USCs and LPRs residing outside the U.S. – and IRS Form 8938 […]
May 2, 2014 at 5:41 am
[…] Does any of the above statements in the IRS announcement mean that a USC residing overseas can never be subject to penalties for not filing information returns regarding their non-U.S. international assets and “specified foreign financial assets”? The short answer is – NO! See, USCs and LPRs residing outside the U.S. – and IRS Form 8938 […]