Specified Foreign Assets Reported on Form 8938
Which Accounts are Reported on Form 8938: When it comes to foreign asset reporting, one of the most common forms a US person with offshore accounts may have to file is the Form 8938. The 8938 Form is used to report foreign assets US Government. Unlike the FBAR which is used to report the maximum account value to FinCEN during the year, the 8938 is filed with your IRS tax return. The failure to file this FATCA form may result in offshore penalties, but these penalties may be avoided, minimized or abated by using one of the approved offshore amnesty programs.
Let’s review 5 common types of accounts that is required to be included on Form 8938:
5 Common Accounts Which are Reported on the Form 8938
Here are 5 types of accounts often seen on Form 8938:
A Foreign bank account is considered a financial account that is reported on the Form 8938.
It does not matter if the accounts are dormant or active, and it does not matter if the account generates any income. Bank accounts in general are reported on the 8938.
Investment accounts are also reported on the 8938 Form/
There are many different types of investment accounts, depending on what country you reside. You may possibly have a Demat in India, an ISA in the UK, or a Mutual Fund Account in Spain. Nevertheless, when you have an investment account — even if you do not consider it to be an account per se — it is reported on the FATCA Form 8938.
Life Insurance Policies
Not all life insurance policies are reported on the Form 8938.
Generally, when a foreign life insurance policy has a surrender value or a cash value, then you have to report it on FATCA Form 8938. One important fact to keep in mind is that you are not reporting the payout value, but rather the surrender value.
For example, while a policy may have a $250,000 face value, it is only worth $30,000 if you were to surrender it today — and therefore you report the $30,000 surrender value on Form 8938.
Pension accounts overseas are also reported on IRS Form 8938.
We work with over 80+ different countries, and each country typically has its own type of pension system. Whether it is a Superannuation in Australia, a Provident fund in Hong Kong or Singapore, or a retirement plan in Sweden — the pension is reportable.
Many countries have something called a Pillar system. Typically Pillar 1 (Social Security or OASI) is not the type of “account” that is reported on the Form 8938, but rather pillar 2 (occupational) or pillar 3 (personal) accounts are reported on the Form 8938.
A final important note about Form 8938reporting is that the account does not have to be active in order for it to be reported. Many times, taxpayers come to us with prior year Form 8938s that are missing dormant or inactive accounts — and some of these counts are very significant in value. The reason the taxpayer did not report the account was because the account was not active, and so they presumed it was not reportable — but being active is not a requirement for Form 8938 reporting.
In conclusion, the Form 8938 requires US persons with foreign bank and financial accounts to report the information each year on an annual Form 8938 — when they meet the threshold requirements for reporting. The filing requirements go far beyond just bank accounts, and since the IRS has taken to issuing large penalties for noncompliance, if you are out of compliance you should consider getting into compliance before you are penalized. If you have more questions, we have a detailed FAQ to assist you.
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