Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS, generally using Form 8938, Statement of Specified Foreign Financial Assets. The Form 8938 must be attached to the taxpayer’s annual tax return.
Uncertain whether you have to file? Generally, aggregate value of these assets must exceed $50,000, but in some cases, the threshold may be higher.
You may also have to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR). This comparison table will help you figure out whether you also need to file the FBAR.
Still looking for more answers? View the frequently-asked-questions (FAQs) for Form 8938 for information on real estate, foreign assets held in U.S.-based financial accounts, foreign pensions, valuing certain assets and more.
Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification). Further, underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial understatement penalty of 40 percent.
The IRS issued final regulations that require a domestic entity to file Form 8938 if the entity is formed or used to hold specified foreign financial assets and the assets exceed the appropriate reporting threshold. See T.D. 9752 for more information.