As someone who has foreign accounts in counties other than the United States, it’s important that you understand the Foreign Account Tax Compliance Act (FATCA). This is an important act that was created to help eliminate tax evasion by those holding accounts outside the United States.
The FATCA does require some people to report their assets held outside the county on an IRS Form 8938. This form is a Statement of Specified Foreign Financial Assets and is required by law if you hold assets over the $50,000 threshold.
The FATCA requires that you attach the above form to your tax return annually. Of course, there are some exceptions to the above threshold, especially if you are married or living in another country, then the threshold is higher. If you are living abroad, for example, your specified foreign financial assets must be worth over $200,000 or reach $300,000 during the tax year to require you to file the Statement of Specified Foreign Financial Assets.
Does everyone have to file in accordance with the FATCA?
There are a few business exemptions. For example, if the financial account is maintained by a U.S. payor including the U.S. branch of a foreign bank or other financial institution, then the accounts there may not need to be reported. If you run a business and want to know if you must file your FATCA since you work in both the U.S. and other counties, your attorney can help you understand your specific requirements.
Do all foreign assets get reported on Form 8938?
Not all foreign assets are reported on Form 8938. If you have passive foreign investments, they are reported on Form 8621. Trusts are filed on Form 3520 or Form 3520-A. Foreign partnerships are filed on Form 8865, while Canadian retirement savings plans are reported on Form 8891.
Since these assets are reported elsewhere, they do not need to be reported on Form 8938. They do, however, need to be reported to the government on one of these other forms.
There is no question that the U.S. tax system is complicated. It’s a good idea to get professional help when filing, at least the first time.
Source: Nov. 30, -0001