Foreign assets can complicate your tax filings whether you are an individual taxpayer, corporation or partnership. Once you own assets above a certain threshold, you are required to file an IRS Form 8938 with your tax return to disclose to the IRS what foreign assets you have. Here’s what you need to know about this form and your obligations.
What Is IRS Form 8938?
This form was implemented over a decade ago as part of the Foreign Account Tax Compliance Act. The act was designed to help make stricter requirements for those with foreign assets so that companies and individuals have a harder time hiding assets offshore. IRS Form 8938 involves specified foreign financial assets, which can include:
- Stocks, bonds, and non-US securities that are not held in an investment account
- Financial accounts with non-US institutions like investment accounts, bank accounts, mutual funds, and compensation plans
- Notes or bonds issued by a non-US entity
- Interest in a non-US entity, like an estate, trust, corporation, or partnership
- Personal residences or rental properties if they are held by a foreign partnership, trust, corporation, or estate
Do You Need to Complete an IRS Form 8938?
Everyone does not need to complete the IRS Form 8938, but many people are subject to it. If you have the assets above and are a citizen, non-resident alien, or resident alien, you are required to report your assets. However, if you are exempt from filing a tax return because you earn less than the filing requirements, you are also exempt from needing to file the IRS Form 8938.
What Are the Reporting Thresholds?
On top of regular reporting requirements, there are thresholds in place that determine whether you need to file an IRS Form 8938. Different types of filing have different thresholds, including:
- Unmarried individuals, who must file if the market value of foreign assets is over $50,000 on the last day of the year or over $75,000 at any point during the year
- Married individuals filing jointly, who must file if the market value of foreign assets is over $100,000 on the last day of the year or over $150,000 at any point during the year
- Married individuals filing separately if the market value of their foreign assets is over $50,000 on the last day of the year or over $75,000 at any time
- Unmarried individuals living outside the United States if the market value of the assets exceeds $200,000 on the last day of the year or over $300,000 at any point during the year
- Married individuals living outside of the US and filing jointly if their assets are worth over $400,000 on the last day of the year or $600,000 at any point
- Married individuals filing separately and living outside of the US if the market value of the assets exceeds $200,000 on the last day of the year or over $300,000 at any point during the year
- Corporations, partnerships, and trusts that satisfy the requirements above and have assets over $50,000 on the last day of the year or over $75,000 at any point during the year
If you aren’t sure if you need to file your IRS Form 8938, work with the team at MKS&H.
Overcome International Tax Challenges with Help from MKS&H
MKS&H provides tax and accounting services to businesses of every size and in every industry. We can work with you to make international taxes easily and avoid the most common international tax challenges. Contact us today for a consultation.
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.