What is Form 8938 – Statement of Specified Foreign Financial Assets?
Form 8938 is used to report your specified foreign financial assets if the total value is more than the appropriate reporting threshold.
Who is required to file Form 8938?
You are required to file Form 8938 if you are one of the following :
- A U.S. citizen or
- A resident alien of the Unite
- Savings, deposits, checking, and brokerage accounts are held with a bank or broker-dealer.
States for any part of the tax year ( to know who is a resident alien, please read here )
- A non-resident alien who makes an election to be treated as a resident alien for the purpose of filing a joint tax return.
What is the reporting threshold?
- Unmarried taxpayers living in the US: The total value of your 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
- Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is 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 US: The total value of your 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.
- Taxpayers living abroad. You are a taxpayer living abroad if:
- You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or
- You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries for at least 330 days.
If you are a taxpayer living abroad you must file if:
- You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
- You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
What assets need to be reported?
- Savings, deposits, checking, and brokerage accounts held with a bank or broker-dealer.
- Stock or securities issued by a foreign corporation;
- A note, bond, or debenture issued by a foreign person;
- Any interest in a foreign-issued insurance contract or annuity with a cash surrender value.
- An interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterpart;
- An option or other derivative instrument with respect to any of these examples or with respect to any currency or commodity that is entered into with a foreign counterpart or issuer;
- A partnership interest in a foreign partnership;
- An interest in a foreign retirement plan or deferred compensation plan;
- An interest in a foreign estate;
The first four items are the ones which are applicable in most cases.
We often receive calls asking us if insurance contracts need to be reported. Please note that the fourth point clearly states that insurance contracts which have a cash surrender value need to be reported.
What does not need to be reported?
As of January 2023, the following items do not have to be reported:
- Foreign real estate
- Tangible assets such as jewelry, cars, and other antique pieces
- Gold is held directly for investment. However, gold held in the form of certificates needs to be disclosed.
- If you are not required to file your income tax return, you do not have to file Form 8938.
