Do You Need to File IRS Form 8938 or an FBAR (or Both) By October 15, 2022?
For U.S. taxpayers who own “specified foreign financial assets,” Tax Day doesn’t just come with an obligation to file an annual income tax return. These taxpayers must file additional forms to disclose their foreign financial assets as well. Fortunately, for those who fail to file, the Internal Revenue Service (IRS) provides an automatic extension to October 15.
As October 15, 2022, is fast approaching, now is the time for U.S. taxpayers who own foreign financial assets to determine if they need to file IRS Form 8938, a Report of Foreign Bank and Financial Accounts (FBAR) or both. So, if you own foreign financial assets, do you need to file?
Two Key Considerations for Foreign Financial Asset Disclosure
When assessing taxpayers’ foreign financial asset disclosure obligations, there are two key considerations: (i) Are the assets subject to reporting? (ii) If so, has an applicable threshold been satisfied?
1. Did You Own “Specified Foreign Financial Assets” During the Tax Year?
Not all foreign financial assets are subject to disclosure on IRS Form 8938 and the FBAR. IRS Form 8938 covers only “specified foreign financial assets,” while the FBAR filing requirement applies to taxpayers with foreign financial accounts only. Under the Foreign Account Tax Compliance Act—which establishes the IRS Form 8938 filing requirement—“specified foreign financial assets” include:
- Financial accounts held at foreign banks and financial institutions
- Stocks and other securities issued by foreign corporations
- Partnership interests in foreign partnerships
- Financial instruments and agreements issued by foreign entities or entered into with foreign counterparties
- Interests in foreign estates, insurance contracts and certain annuities
If held directly (i.e., not through a partnership, corporation or trust), the following do not qualify as “specified foreign financial assets” under FATCA:
- Foreign currencies
- Foreign real estate
- Most tangible assets held overseas
2. Did These Assets Exceed an Applicable Threshold During or At the End of the Tax Year?
Foreign financial accounts and other specified foreign financial assets are only subject to disclosure if their value exceeds an applicable threshold. This can be a threshold surpassed at any point during the tax year or a reduced threshold that applies at the end of the tax year. The thresholds vary for U.S. taxpayers residing domestically and overseas.
What if You Are Behind on Your IRS Form 8938 and FBAR Filings?
What if April 15, 2022, wasn’t the first time you failed to file IRS Form 8938 or an FBAR? In this scenario, you cannot simply come into compliance by making a filing on or before October 15. While you must meet 2022’s extended deadline, you must separately address your past filing violation (or violations) as well. Depending on the circumstances involved, this may mean making a streamlined disclosure or voluntary disclosure—or it may mean seeking to work out a resolution with the IRS through other means.
Discuss Your Obligations (and Options) with Tax Attorney Kevin E. Thorn
Do you have questions about foreign financial account disclosure compliance? If so, tax attorney Kevin E. Thorn, Managing Partner of Thorn Law Group, can help. Call 202-349-4033, email email@example.com or contact us confidentially online to schedule an appointment today.