Over $50K in Foreign Accounts? Here’s What You Need to Know!

The Internal Revenue Service (IRS) wants to know if you had more than $50k USD at the end of the year or more than $75k at any time during the year in one or various foreign bank accounts. And just so we are clear, this is a different requirement from the FinCEN Form 114 reporting requirement that is also due on April 15th for the previous year in which is being reported. You will be able to read more about the FinCEN Form 114 requirement in the article I wrote here.

When filing your tax return, the person you are relying on to do your taxes should be asking you whether you had an interest in a foreign financial account or may be you are using a software to do it yourself, well, in that case, you need to be reporting this information in Form 8938 to the IRS. This form rolls into Schedule B of your tax return and applies to anyone who is filing a tax return (except for the exceptions outlined below), regardless of your immigration status. It is important to note that Form 8938 is not always needed so make sure to review the instructions for that form because there are many moving pieces that may make you fall under an exception.

The way you would value your financial assets is by taking the exchange rate at year end and multiplying the appropriate exchange rate time the assets you hold in the foreign financial account. If the amount is over $50,000 at the end of the year, you will need to consider filing for Form 8938.

Where and how to file

You should file this form with your annual tax return, Form 1040 or any of its variations. You can take a look at Form 8938 here.

Exceptions

As always, there are exceptions where you are not required to file this form in your tax return:

  • If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold

  • You are not required to report specified foreign financial assets on Form 8938 for the part of your tax year covered by Form 1040NR or Form 1040NR-EZ, provided you comply with the filing requirements of Regulations section 301.7701(b)-7(b) and (c), including the requirement to timely file Form 1040NR or Form 1040NR-EZ

  • Other exceptions are included in the instructions to Form 8938 (too many to include here). You can review a complete list of the exceptions here.

Failure-to-File Penalties

If you are required to file Form 8938 but do not file a complete and correct Form 8938 by the due date (including extensions), you may be subject to a penalty of $10,000 for each 30 days.

If you have any questions regarding this filing, please contact me and let's discuss your situation.

Jose GarciaIRSrequirements, Form8938, Money, foreigncurrency, foreigninvestors