Form 8938 Threshold Requirements

Starting tax year 2011, the IRS imposed a new tax reporting requirement on individual taxpayers who hold specified foreign financial assets with an aggregate value exceeding a relevant threshold. In its instructions to Form 8938, the IRS lists five main categories of taxpayers and assigns distinct reportable threshold to each category. Let’s explore each category.

1. Unmarried Taxpayers Living in the United States

If the taxpayer is not married and lives in the United States, then the applicable 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 that tax year.

2. 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, then the reporting threshold is satisfied if the value of his specified foreign financial assets is 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.

3. 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.

4. Married Taxpayers Living Abroad and Filing a Joint Income Tax return

If the taxpayer has a tax home is abroad (a special test applies to determine whether this is the case), satisfies the presence abroad test, 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 you or your spouse owns 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.

5. Married Taxpayers Living Abroad and Filing Any Return Other Than Joint Tax Return

If the taxpayer has a tax home is abroad, satisfies the presence abroad test, and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately 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.

Presence Abroad Tests

There are two “presence abroad” tests for the purposes of categories 4 and 5 above.

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

Second, the presence abroad test is satisfied if the taxpayer is a U.S. citizen or residence who is present in a foreign country or countries at least 330 full days during any period of twelve consecutive months that needs in the tax year being reported.

Contact Sherayzen Law Office For Help With IRS Form 8938

The reporting requirements under Form 8938 can be very complex. Moreover, in case of prior non-compliance with the FBAR or other reporting requirements (Form 5471, 8865, 8891, et cetera), filing of Form 8938 should often be done in conjunction with a voluntary disclosure process in order to reduce or avoid additional tax penalties.

For legal advice with respect to Form 8938, determination whether its requirements apply to you, help with completing the form properly, and coordination of the Form 8938 filing with other U.S. tax compliance as part of the voluntary disclosure process, you should contact Sherayzen Law Office. Our experienced tax compliance firm will help you resolve any issues related to Form 8938 and guide you toward proper compliance with its requirements.