When Do Expats Abroad Have a Higher Form 8938 Threshold?

When Do Expats Abroad Have a Higher Form 8938 Threshold?

Do Expats Abroad Have a Higher Form 8938 Threshold?

Form 8938 is used by US taxpayers residing in the United States and abroad to report foreign assets they own or have an interest in. The form is required in conjunction with FATCA (Foreign Account Tax Compliance Act). Form 8938 is similar to another (and more common) international information reporting form known as the FBAR. But, unlike the FBAR, Form 8938 has different threshold reporting requirements depending on whether or not the taxpayers filing married filing jointly or single/separately. In addition, it is also important to determine whether the taxpayers are considered US residents or foreign residents. The threshold requirements for having to file for foreign residents are much higher than they are for US residents. The question becomes:

    • How does a person qualify as a foreign resident for the increased threshold requirement on Form 8938?

Form 8938 instructions provide a good summary.

Form 8938 Presence Abroad Tests

As provided by the IRS:

      • Presence abroad.

        • You satisfy the presence abroad test if you are one of the following.

          • A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

          • A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure

Contact our firm today for assistance.