A Simple Guide to Understanding Form 8938 and Your Financial Assets Abroad

Who Needs to File Form 8938?

We know taxes can be complicated, especially when dealing with assets held in foreign countries. The U.S. tax system requires certain taxpayers to report their foreign assets with a specific form known as Form 8938, Statement of Specified Foreign Financial Assets. But who needs to file this form and when? And what exactly constitutes a "specified foreign financial asset"?

If you fall under one of the following categories, you might need to file Form 8938:

You're a U.S. citizen.
You're a resident alien.
You're a nonresident alien, but choose to be treated as a resident alien to file a joint income tax return.
You're a nonresident alien who permanently resides in American Samoa or Puerto Rico.

Understanding the Reporting Thresholds

Filing Form 8938 depends on certain financial thresholds. These thresholds vary according to your filing status (whether you're single, married, or filing separately) and your location (whether you live in the United States or abroad).

If you reside in the United States and are single or filing separately, you'll need to file Form 8938 if you have over $50,000 in specified foreign financial assets at the year's end or if you had over $75,000 at any time throughout the year. If you're married and filing jointly, the thresholds increase to $100,000 at the end of the year or $150,000 at any point during the year.

For taxpayers living outside the U.S., the thresholds are higher. Single individuals or those filing separately must submit Form 8938 if they have more than $200,000 in foreign assets at year's end or if they had over $300,000 at any time during the year. For those married and filing jointly, these values rise to $400,000 and $600,000, respectively.

What Are "Specified Foreign Financial Assets"?

"Specified foreign financial assets" is a key term in this context. These are foreign financial accounts and non-account assets held for investment purposes. Examples include foreign stocks and securities, financial contracts with non-U.S. parties, and interests in foreign entities. Assets held for use in a business or trade aren't included.

Changes to Thresholds and Need for Professional Guidance

It's essential to remember that these thresholds could change, and these figures are based on the data available up until September 2021. Tax obligations can be complex and dynamic, which is why we recommend consulting with a tax professional or referring to the IRS's latest instructions for Form 8938.

Get Professional Help with Your Tax Obligations

Navigating the complexities of the U.S. tax system can be daunting, but you don't have to do it alone. Our team of skilled accountants is here to guide you through each step of the process, ensuring that you meet your obligations and minimize potential liabilities. Whether you have foreign assets or other tax complexities, consider partnering with us for your accounting needs.

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