2024 Form 8938 Threshold | US International Tax Lawyers
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 2024 Form 8938 threshold limits.
2024 Form 8938 Threshold: Form 8938 Background
Form 8938 burst onto 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 2010.
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.
2024 Form 8938 Threshold: Form 8938 is a Dangerous Form
This enormously-grand 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 2024 Form 8938 filing threshold limits.
2024 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.
2024 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.
2024 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:
1. 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.
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, 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.
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.
2024 Form 8938 Threshold: Taxpayers Living Abroad
Here are the Form 8938 filing thresholds for taxpayers who live abroad:
1. 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.
2. Taxpayers Filing Any Return Other Than A 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.
2024 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!