2026 Form 8938 Threshold | US International Tax Lawyers

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US taxpayers must file Form 8938 with their US tax returns if they hold foreign financial assets with an aggregate value exceeding a relevant balance threshold. This article discusses the 2026 Form 8938 threshold limits.

2026 Form 8938 Threshold: Form 8938 Background

Form 8938 burst into the US international compliance scene in 2011 as a result of the famous Foreign Accounts Tax Compliance Act (FATCA). FATCA was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”) which was signed into law by President Obama in 2020.

FATCA revolutionized international tax compliance of the world by forcing foreign banks to report their US-held accounts to the IRS. In essence, it created the third-party verification of foreign accounts that FBAR has always lacked. This third-party verification was supported on the other side by creation of a new requirement to report foreign assets by US taxpayers as part of their US tax returns – Form 8938.

Form 8938’s scope of disclosure is very broad. It generally includes two types of “specified foreign financial assets”: (a) any financial account (also defined very broadly) maintained by a foreign financial institution (again defined broadly); and (b) other specified foreign financial assets not held in an account maintained by a foreign institution.  Other Specified Foreign Financial Assets is a term with a reach far and beyond any other US international tax form, making Form 8938 a unique “catch-all” international tax reporting requirement.

2026 Form 8938 Threshold: Form 8938 is a Dangerous Form

The huge scope of Form 8938 presents a grave danger to US taxpayers, because US Congress armed the form with a wide range of penalties, including a $10,000 failure-to-file fee.  For these reasons, it is highly important to understand when a particular situation triggers the Form 8938 filing requirement. One of the most important filing criteria is the subject of this article — the 2026 Form 8938 filing threshold limits.

2026 Form 8938 Threshold: Filing Threshold Factors

When considering the Form 8938 threshold requirements, there are two most important factors that influence which filing threshold will apply in a particular situation. First, the filing status of the taxpayer(s): married filing jointly, married filing separately, single, et cetera.

The second factor is whether the taxpayer lives in the United States or lives abroad. 

2026 Form 8938 Threshold: Legal Test for Living Abroad

The IRS will agree that a taxpayer lives abroad if he meets one of the two “presence abroad” tests.

The first presence abroad test is satisfied if the taxpayer is a US citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period of an entire tax year.

The second presence abroad test is satisfied if the taxpayer is a US citizen or resident who is present in a foreign country or countries at least 330 full days during any period of twelve consecutive months in the relevant tax year.

Of course, these tests are almost exact replicas of the test for Foreign Earned Income Exclusion.

2026 Form 8938 Threshold: Taxpayers Living in the United States

Let’s first discuss the Form 8938 filing thresholds for taxpayers who live in the United States category by category:

Unmarried Taxpayers Living in the United States: the taxpayer is required to file Form 8938  if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during that tax year.

Married Taxpayers Filing a Joint Income Tax Return and Living in the United States: if the taxpayer is married and files joint income tax return with his spouse, Form 8938 must be filed if the spouses’ specified foreign financial assets are either more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year.

Married Taxpayers Filing Separate Income Tax Returns and Living in the United States: if the taxpayer is married and lives in the United States, but files a separate income tax return from his spouse, then the reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Therefore, this category is very similar to that of the unmarried taxpayer who resides in the United States.

2026 Form 8938 Threshold: Taxpayers Living Abroad

Here are the Form 8938 filing thresholds for taxpayers who live abroad:

Married Taxpayers Filing a Joint Income Tax Return and Living Abroad: if the taxpayer lives abroad (as described above) and files a joint tax return with his spouse, then the reporting threshold is satisfied if the value of all specified foreign financial assets that the spouses own is either more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.

Taxpayers Filing Any Return Other Than Joint Tax Return and Living Abroad: if that taxpayer lives abroad and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately, head of household or unmarried), then the reporting threshold is satisfied if the value of all specified foreign financial assets is either more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the tax year.

2026 Form 8938 Threshold: Specified Domestic Entity

Specified Domestic Entities are also required to file Form 8938. The filing threshold for a specified domestic entity is satisfied if the total value of such an entity’s specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.

Contact Sherayzen Law Office For Help With IRS Form 8938

The reporting requirements under Form 8938 can be very complex. Moreover, Form 8938 noncompliance often occurs in conjunction with noncompliance with FBAR and other reporting requirements (such as Forms 5471, 8621, 8865 et cetera).  In such cases, filing of a late Form 8938 is often should be done through an IRS offshore voluntary disclosure option in order to reduce additional IRS tax penalties.

Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including Form 8938. We are highly experienced with Form 8938 issues, including offshore voluntary disclosures involving Form 8938.  We can help you!

Contact us today to schedule your confidential consultation!

2026 Foreign Earned Income Exclusion | International Tax Lawyer & Attorney

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The Foreign Earned Income Exclusion (“FEIE”) is a valuable tax strategy available to US tax residents who live and work abroad. It allows US citizens to exclude a certain amount of foreign earned income from their US taxable income. The IRS adjusts the precise amount every year.  In this article, I will discuss the 2026 Foreign Earned Income Exclusion.

2026 Foreign Earned Income Exclusion: Background Information

FEIE was born out of the fact that the US tax system is unique and taxes its citizens and even more broadly its residents on their worldwide income irrespective of where they reside. In many countries, such taxpayers are subject to local foreign income taxes on the same income. In order to alleviate the potential burden of double taxation, the US Congress enacted Section 911 of the Internal Revenue Code. This section codified FEIE.

Section 911 allows qualifying individuals to exclude a specified amount of foreign earned income from US taxable income. The IRS adjusts this amount every single year.  A taxpayer must use Form 2555 to claim FEIE.

2026 Foreign Earned Income Exclusion: Eligibility

In order to claim FEIE, a taxpayer must meet certain requirements set forth in IRC §911. I will provide only a brief outline of these requirements in this article. They are discussed in more detail in other articles on our website.

First of all, FEIE applies only to foreign earned income, not passive income and not US-source income.

Second, the taxpayer must maintain his tax home in a foreign country. “Tax Home” is a term of art that has its specific meaning.

Third, you must pass either the physical presence test or the bona fide residence test.

2026 Foreign Earned Income Exclusion: Additional Considerations

While FEIE brings a huge benefit of income exclusion, it often is not the best option for US taxpayers who reside overseas. Let’s focus on the four most important considerations.

First, FEIE limits and in some cases completely eliminates the ability to take Foreign Tax Credit (“FTC”). If you use FEIE, you cannot use the FTC to reduce US taxes on income already excluded under the FEIE.  The problem arises when FTC is actually higher than the US tax.  In this case, you may be losing a very important tax strategy to reduce your US taxes not only in the current year, but also in the future.

Second, FEIE may result in ineligibility to take other tax credits normally available to a taxpayer.

Third, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion).

Finally, while not a tax consideration, usage of FEIE by US permanent residents may result in the abandonment of their green card. In other words, FEIE may present a huge risk to the immigration goals of a taxpayer.

2026 Foreign Earned Income Exclusion: Adjustment for 2026

On October 9, 2025, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $132,900 for the tax year 2026. This is up from $130,000 in the tax year 2025.

Contact Sherayzen Law Office for Professional Help with Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion is a vital tax tool for US taxpayers working abroad, but it must be used cautiously and after careful consideration of all circumstances.  Hence, if you are a US taxpayer who lives abroad or you are planning to accept a job overseas, you need to secure the help of Sherayzen Law Office, a premier firm in US international tax compliance. We can help you navigate the complexities of FEIE, determine your eligibility for it and build a tax strategy to help you maximize the advantages offered by the Internal Revenue Code. Contact Us Today to Schedule Your Confidential Consultation!

First Quarter 2026 IRS Interest Rates on Overpayment & Underpayment of Tax

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On November 13, 2025, the IRS announced that the First Quarter 2026 IRS interest rates on overpayment and underpayment of tax will not change from the Fourth Quarter of 2025.

This means that, the First Quarter 2026 IRS interest rates will be as follows:

seven (7) percent for overpayments (seven (7) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) percent for the portion of corporate overpayment exceeding $10,000.

How the IRS Calculated First Quarter 2026 IRS Interest Rates

The IRS calculates the IRS interest rates based on specific tax provisions. We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.

Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

Finally, pursuant to the IRC §6621(b)(1), the IRS computed the First Quarter 2026 IRS interest rates based on federal short-term rates in October of 2025.

Importance of the First Quarter 2026 IRS Interest Rates

The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.

Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

Finally, the First Quarter 2026 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.

We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates.

Fourth Quarter 2025 IRS Interest Rates on Overpayment & Underpayment of Tax

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On August 25, 2025, the IRS announced that the Fourth Quarter 2025 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Fourth Quarter of 2025.

This means that, the Fourth Quarter 2025 IRS interest rates will be as follows:

seven (7) percent for overpayments (seven (7) percent in the case of a corporation);

seven (7) percent for underpayments;

nine (9) percent for large corporate underpayments; and

five (5) percent for the portion of corporate overpayment exceeding $10,000.

How the IRS Calculated Fourth Quarter 2025 IRS Interest Rates

The IRS calculates the IRS interest rates based on specific tax provisions. We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.

Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.

Finally, pursuant to the IRC §6621(b)(1), the IRS computed the Fourth Quarter 2025 IRS interest rates based on federal short-term rates in July of 2025.

Importance of the Fourth Quarter 2025 IRS Interest Rates

The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.

Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.

Finally, the Fourth Quarter 2025 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.

We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Fourth Quarter 2025 IRS interest rates.

2025 SDOP Audit | Streamlined Domestic Offshore Procedures Lawyer

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Every submission under the Streamlined Domestic Offshore Procedures (SDOP) may be subject to an IRS audit, including the submissions made in 2025. In this article, I will explain what is the 2025 SDOP Audi and what a taxpayer should expect during the Audit.

2025 SDOP Audit: Background Information on Streamlined Domestic Offshore Procedures

Streamlined Domestic Offshore Procedures is a voluntary disclosure option offered by the IRS since June of 2014 to noncompliant US taxpayers to settle their past tax noncompliance concerning foreign assets and foreign income at a reduced penalty rate. In order to participate in SDOP, a taxpayer must meet various eligibility requirements. The most important of these eligibility requirements is non-willfulness of prior noncompliance.

SDOP is likely to be the most convenient and the least expensive voluntary disclosure option for taxpayers who is not eligible for Streamlined Foreign Offshore Procedures and whose prior tax noncompliance was non-willful. 

2025 SDOP Audit: Why SDOP Disclosures Are Subject to IRS Audits

SDOP audits originate within the very nature of SDOP. SDOP voluntary disclosures have certain eligibility requirements.  Once taxpayers submit their disclosures, the IRS does not immediately subject them to an immediate comprehensive review of whether the disclosures met all eligibility requirements.  There is a review process, but initially it focuses on whether the taxpayers met all formalities of the SDOP.

This is very different from the immediate comprehensive audit-like review of all items as part of the voluntary disclosure process that form part of some other programs, such as prior OVDPs (Offshore Voluntary Disclosure Program) or even current IRS Voluntary Disclosure Practice (VDP). These voluntary disclosure options usually also require the signing of Form 906, the Closing Agreement. SDOP does not have that final stage of signing Form 906.

This means that, if a suspicion arises concerning whether a taxpayer met the SDOP eligibility requirements, the only way for the IRS to resolve it is to audit the entire disclosure, particularly on the issue of non-willfulness. As part of the SDOP process, the IRS reserves the right to audit any SDOP submission  at any point within three years after the submission of the original SDOP voluntary disclosure package.

2025 SDOP Audit Process: Initial Contact

The exact process of a Streamlined Submission Audit varies from case to case, but all of such audits have a similar format: initial letter with request for a meeting, meeting with an interview, review of submitted documents and (very likely) additional requests for information, potentially interview of other involved individuals (such as a tax preparer) and, finally, the results of an audit are provided by the IRS to taxpayer(s) and/or the representative indicated on Form 2848.

In other words, your 2025 SDOP Audit would commence in a way very similar to a regular IRS audit: the IRS sends letter to taxpayers and (if there is a Form 2848 on file) to their representatives. The letter explains that the IRS decided to examine certain tax returns (usually all three years of amended tax returns) and asks for submission of all documentation and work papers that the taxpayer or the tax preparer used to prepare the amended returns. Additionally, the letter requests that the taxpayers’ representative (or taxpayers if not represented) contact the IRS agent in charge of the audit to schedule the initial meeting.

2025 SDOP Audit Process: Interview and Follow-up

During the initial meeting, the IRS agent will review (at least to make sure he or she has what the IRS needs) the documents that the taxpayer supplied earlier in response to the IRS requests. In larger cases, the IRS agent will need a lot more time to later examine all of the submitted documents and see if he or she needs additional documents. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.

Also, during an initial meeting, there is going to be an interview with the taxpayer(s). I will discuss the interview separately in a different article.

Once the review of the initial package of documents is concluded, it is very likely that the IRS agent will have questions and additional document requests. The questions may be answered by the taxpayers’ attorney during a separate meeting with the agent; smaller questions may be settled over the phone.

If the IRS needs additional documentation, the agent will send out an additional request to taxpayers and/or their attorney. The answer will most likely need to be provided in writing (actually, it is often better to state your position in writing for the IRS Appeals Office).

Once the IRS completes its interview of other involved parties and reviews all evidence, it will make its decision and submit the results of the audit to the taxpayers and their tax attorney in writing. The taxpayers’ attorney will need to build a strategy with respect to the taxpayers’ response to the audit results depending on whether the taxpayers agree or disagree with the results of the audit.

Differences Between Your 2025 SDOP Audit and Regular IRS Audit

At first, it may seem that there are no big differences between a regular IRS audit and an SDOP audit. While procedurally this may be correct, substantively it is not.

The greatest difference between the two types of IRS audits is the subject-matter of what the IRS subjects to its review. While a regular IRS audit will concentrate on the tax returns only, a Streamlined Submission Audit will involve everything: amended tax returns, FBARs, other information returns and, most importantly, Non-Willfulness Certification. In other words, a Streamlined Submission Audit will focus not only on whether the tax forms are correct, but also on whether the taxpayer was actually non-willful with respect to his prior tax noncompliance.

This difference in the subject-matter examination will carry over to other aspects of a Streamlined Submission Audit: the taxpayers’ interview will focus on their non-willfulness arguments, third-party interviews of original tax preparers become a regular feature (this may be different from a regular IRS audit), and the final IRS results must necessarily make a decision on whether to challenge the taxpayers’ non-willfulness arguments.

Failure by a taxpayer to sustain his non-willfulness arguments may result in a disaster for the taxpayer with a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.

This is why it is so important for a taxpayer subject to an SDOP Audit to retain the services of an experienced international tax lawyer to handle the audit professionally.

Contact Sherayzen Law Office for Professional Help with Your 2025 SDOP Audit

If the IRS audited your submission under the Streamlined Domestic Offshore Procedures, contact Sherayzen Law Office as soon as possible. Our international tax law firm is highly experienced in offshore voluntary disclosures (SDOP, SFOP, “noisy disclosures”, “quiet disclosures”, et cetera) and the IRS audits of voluntary disclosures, including the audits of SDOP submissions.  We can Help You during Your IRS Audit!  Contact Us Today to Schedule Your Confidential Consultation!