Specified Domestic Entity Form 8938 Filing Threshold | FATCA Lawyer

The Specified Domestic Entity Form 8938 filing threshold is likely to be very easily satisfied by the majority of Specified Domestic Entities. With the major tax return filing deadlines just two or three months away (depending on whether an entity is a corporation, a partnership or a trust), every Specified Domestic Entity must assess whether it is required to file FATCA Form 8938. Failure to do so may result in imposition of Form 8938 penalties by the IRS.

Specified Domestic Entity Form 8938 Filing Threshold

For tax years beginning after December 31, 2015, a Specified Domestic Entity must file Form 8938 if the total value of its Specified Foreign Financial Assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year. This is an incredibly low Specified Domestic Entity Form 8938 filing threshold that pretty much means that virtually all Specified Domestic Entities will have to file a Form 8938.

Transition Years Are Most Dangerous

Transition tax years 2016, 2017 and 2018 are likely to be the most dangerous for Specified Domestic Entities. Since the Specified Domestic Entity Form 8938 filing threshold is very low and the awareness of the Specified Domestic Entity Form 8938 filing obligation is limited to a small number of specialized tax professionals, there can be no doubt that many Specified Domestic Entities will fail to comply with their Form 8938 filing obligations and may face steep Form 8938 penalties.

Contact Sherayzen Law Office for Help with the Specified Domestic Entity Form 8938 Filing Obligations

If your business or a trust is classified as a Specified Domestic Entity and your entity failed to file FATCA Form 8938,  contact Sherayzen Law Office for professional help. Our international tax law firm specializes in helping business and individuals with their US international tax compliance requirements, including Form 8938, and with their offshore voluntary disclosures involving a Form 8938.

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IRS Releases Guidance on Foreign Financial Asset Reporting (Form 8938)

On December 15, 2011, the Internal Revenue Service stated that it will soon release the final version of a new information reporting form that taxpayers will use starting this coming tax filing season to report specified foreign financial assets for tax year 2011.  Form 8938 (Statement of Specified Foreign Financial Assets) will be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the IRS imposes significant penalties for failing to comply.

The Form 8938 filing requirement was enacted in 2010 as part of FATCA to improve tax compliance by U.S. taxpayers with offshore financial accounts.  The scope and the depth of the Form is even more profound that the FBARs.

Individuals who may have to file Form 8938 are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory. Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds.

Form 8938 is not required of individuals who do not have an income tax return filing requirement.

The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts).

Failure to file Form 8938 when required may result in severe penalties – $10,000 with an additional penalty up to $50,000 for continued failure to file after IRS notification.  Moreover, a 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.  Other penalties may apply.

Finally, a special statute of limitation rules apply to Form 8938.

Contact Sherayzen Law Office For Tax Help with the IRS Form 8938

If you need any help with respect to understanding Form 8938 or to see whether you need to file this Form, contact Sherayzen Law Office.  Our experienced international tax firm will explain to you the requirements of Form 8938 and help you comply with its requirements.

Form 8938 New Foreign Asset Reporting Requirements: Introduction

In its continuous efforts to combat tax evasion, the IRS imposed a brand-new foreign asset reporting requirements on U.S. persons.  For the very first time, starting tax year 2011 (with certain exceptions), certain individuals must file the new Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount.

This threshold amount differs depending on the particular situation of a U.S. person – whether an individual lives in the United States, is married and filing a joint income tax return, et cetera.

The “specified foreign financial assets” include any financial account maintained by foreign financial institution and certain investment assets such as stock, securities or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty who is not a U.S. person.

Based on this description alone, it becomes obvious that the new Form is likely to impose a higher reporting burden than the famous FBARs.   Note that Form 8938 does not replace the FBAR reporting requirements – i.e. the FBARs must still be filed by June 30 of a relevant year in addition to Form 8938.

Unlike the FBAR, Form 8938 is attached to the filer’s annual tax return and must be filed by the due date (including extensions) for that return.  An annual return includes the following forms: Form 1040, Form 1120, Form 1065, Form 1120-F, Form 1120-S, and Form 1040NR (of a nonresident alien who is a bona fide resident of Puerto Rico or American Samoa).

Note that Form 8938 imposes new failure-to-file and accuracy-related penalties, which are very severe and may be combined with other penalties.  Moreover, failure to file an accurate Form 8938 may extend the statute of limitations for all or a part of your income tax return until three years after the date on which you file Form 8938.

Note that, pursuant to Notice 2011-55, the IRS provides for a transitional rule for the year 2011 which may defer your obligation to file Form 8938 until the tax year 2012 as long as you satisfy all of the three requirements of the transitional rule.

Contact Sherayzen Law Office For Legal Help With Form 8938

This article highlights a few features of the new Form 8938 and it should not be relied upon in determining whether you are obligated to file Form 8938.  Form 8938 is fairly complex and you need professional help to determine how to comply with the Form’s requirements.

If you have any questions with respect to Form 8938, please contact Sherayzen Law Office.  Our experienced international tax firm will help you determine whether you must file Form 8938 and help you draft and file the form with your tax return in order to avoid the heavy IRS penalties for non-compliance.