Definition & Meaning
Form 8938 is a tax form mandated by the IRS that U.S. taxpayers use to report specified foreign financial assets. Introduced as part of the Foreign Account Tax Compliance Act (FATCA), its purpose is to prevent tax evasion through undisclosed overseas assets. The 2015 version of Form 8938 requires detailed reporting on foreign deposit and custodial accounts, other foreign-held assets, and any income derived from these assets.
How to Use the 2015 Form 8938
Taxpayers typically complete Form 8938 as part of their annual tax return. It involves reporting specified foreign financial assets if they exceed certain thresholds. The form includes sections that require identifying information about the taxpayer, details on each foreign asset, including the maximum value during the year, and information on income generated from these assets. Correctly completing this form ensures compliance with IRS regulations and helps avoid potential penalties.
Steps to Complete the 2015 Form 8938
- Determine Filing Requirement: Check if your foreign asset holdings exceed IRS thresholds, which depend on your filing status and residence.
- Gather Information: Collect all necessary documentation, including account numbers, maximum value of assets during the year, and income details.
- Fill Out Identifying Information: Provide your name, social security number, and tax year.
- Report Financial Assets: Enter details about each specified foreign financial asset, such as account ownership, type of asset, and maximum value.
- Include Income Details: Ensure that any income derived from these assets is reported in the relevant sections.
- Cross-Verify With Other Forms: Many taxpayers will need to cross-reference information between Form 8938 and Form 1040.
- Review and Submit: Double-check all entries for accuracy, attach Form 8938 to your tax return, and maintain copies for your records.
Important Terms Related to Form 8938
- Specified Foreign Financial Assets: Broadly includes foreign financial accounts, foreign securities, and interests in foreign entities.
- Thresholds: The asset value at which one must file Form 8938 varies based on marital status and taxpayer residence.
- FATCA: Legislation aiming to counter tax evasion by requiring the reporting of foreign financial accounts and assets.
Required Documents
To fill out Form 8938 accurately, gather documentation such as:
- Foreign bank account statements
- Ownership records of foreign securities
- Details on any foreign fiduciary accounts
- Records of any entities or trusts held in foreign countries
Filing Deadlines / Important Dates
Form 8938 must accompany your federal income tax return (Form 1040) and be submitted by the standard tax filing deadline, typically April 15th. However, extensions granted on Form 1040 also apply to Form 8938 submissions.
Disclosure Requirements
Form 8938 mandates disclosure of assets such as:
- Foreign bank deposit accounts
- Foreign insurance policies and annuities
- Interests in foreign partnerships
- Stock holdings in foreign corporations
- Financial instruments or contracts issued by a foreign entity
Penalties for Non-Compliance
Failure to file Form 8938 or submitting an incomplete or inaccurate form can result in substantial penalties. The base penalty starts at $10,000 per year, increasing if non-compliance continues after IRS notification. Serious cases may lead to further financial penalties and possible criminal charges.
IRS Guidelines
The IRS provides comprehensive guidance on requirements for Form 8938, outlining the criteria for asset reporting, the types of assets to be included, and detailed filing instructions. Understanding these guidelines ensures compliance and minimizes the risk of errors or omissions.
