Introduction to FATCA and Form 8938
The Foreign Account Tax Compliance Act (FATCA) requires US taxpayers to report certain foreign financial assets on Form 8938. This form is used to disclose interests in foreign financial accounts and other foreign assets, and is filed with the taxpayer's annual income tax return.
The purpose of Form 8938 is to help the US government identify taxpayers who may be using foreign financial accounts to evade taxes. By requiring taxpayers to disclose their foreign assets, the IRS can better ensure compliance with US tax laws and prevent tax evasion.
Who Must File Form 8938
US taxpayers who have foreign financial assets with an aggregate value exceeding certain thresholds must file Form 8938. The thresholds vary depending on the taxpayer's filing status and whether they live in the US or abroad.
For example, unmarried taxpayers living in the US must file Form 8938 if their foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the tax year. Taxpayers who live abroad have higher thresholds.
What Assets Must Be Reported on Form 8938
Form 8938 requires taxpayers to report a wide range of foreign financial assets, including foreign bank accounts, securities accounts, and other financial accounts. Taxpayers must also report interests in foreign entities, such as corporations, partnerships, and trusts.
Additionally, Form 8938 requires taxpayers to report certain foreign assets that are not financial accounts, such as foreign real estate and foreign-issued life insurance contracts.
Deadlines for Filing Form 8938
Form 8938 must be filed with the taxpayer's annual income tax return, which is typically due on April 15th. However, if the taxpayer is granted an extension of time to file their income tax return, the deadline for filing Form 8938 is also extended.
Taxpayers who fail to file Form 8938 or who fail to report all of their foreign financial assets on the form may be subject to penalties, including a penalty of up to $10,000 for non-willful failures to file.
Consequences of Non-Compliance with FATCA
Taxpayers who fail to comply with FATCA requirements, including the requirement to file Form 8938, may face significant penalties and fines. In addition to the penalty for non-willful failures to file, taxpayers who willfully fail to file Form 8938 may be subject to a penalty of up to $100,000 or 50% of the value of the foreign financial assets that should have been reported.
Furthermore, non-compliance with FATCA requirements can also lead to additional taxes, interest, and penalties on any unreported income from foreign financial assets. Taxpayers who are found to have willfully evaded taxes may also face criminal prosecution.
Frequently Asked Questions
What is the purpose of Form 8938?
The purpose of Form 8938 is to help the US government identify taxpayers who may be using foreign financial accounts to evade taxes.
Who is required to file Form 8938?
US taxpayers with foreign financial assets exceeding certain thresholds must file Form 8938, including unmarried taxpayers with assets over $50,000.
What assets must be reported on Form 8938?
Form 8938 requires taxpayers to report foreign financial assets, including bank accounts, securities accounts, and interests in foreign entities.
What is the deadline for filing Form 8938?
Form 8938 must be filed with the taxpayer's annual income tax return, which is typically due on April 15th.
What are the consequences of non-compliance with FATCA?
Taxpayers who fail to comply with FATCA requirements may face penalties, fines, and additional taxes, as well as potential criminal prosecution.
How do I file Form 8938?
Form 8938 is filed with the taxpayer's annual income tax return, and can be prepared and e-filed using tax preparation software or with the help of a tax professional.