The Foreign Account Tax Compliance Act (FATCA) requires certain U.S. taxpayers to report specified foreign financial assets by filing IRS Form 8938, “Statement of Specified Foreign Financial Assets.” Form 8938 serves as a supplement to Form 1040 and ensures transparency of offshore holdings. Understanding its due dates, alignment with individual tax returns, and extension procedures is critical to avoid hefty penalties and maintain compliance.
Who Must File Form 8938?
Form 8938 is required for U.S. citizens, resident aliens, and certain non-resident aliens who have an interest in specified foreign financial assets and whose total value exceeds reporting thresholds. These thresholds vary based on filing status and whether the taxpayer lives in the United States or abroad. Typical assets include foreign bank accounts, stocks, partnership interests, and certain foreign-issued insurance contracts.
Reporting Thresholds
- Unmarried taxpayers: Over $50,000 on the last day of the tax year or over $75,000 at any time during the year.
- Married filing jointly: Over $100,000 on the last day or over $150,000 at any time during the year.
- Living abroad (unmarried): Thresholds increase to $200,000 end-of-year or $300,000 at any time.
- Living abroad (joint filers): $400,000 end-of-year or $600,000 at any time.
Standard Due Date for Form 8938
Form 8938 is filed as part of the individual income tax return (Form 1040). Therefore, its standard due date is the same as Form 1040:
- April 15 of the year following the calendar year being reported.
- If April 15 falls on a weekend or legal holiday, the due date shifts to the next business day.
This alignment simplifies compliance by consolidating reporting onto a single return. Taxpayers should attach Form 8938 directly to their Form 1040 or Form 1040NR.
Extension Handling for Form 8938
Taxpayers who need more time to gather information about their foreign assets can extend their filing deadline for both Form 1040 and Form 8938.
Automatic Extension with Form 4868
U.S. taxpayers may file IRS Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return,” by April 15. Filing Form 4868 grants an automatic six‑month extension, moving the due date to October 15. No separate extension is required specifically for Form 8938.
Key points:
- Form 4868 must be submitted by the original April 15 deadline.
- The extension covers both the tax return and all attached schedules, including Form 8938.
- Extension of time to file is not an extension of time to pay; estimated tax payments must still be made by April 15 to avoid interest and penalties.
Special Extension for Taxpayers Abroad
Taxpayers who qualify for the foreign earned income exclusion or foreign housing exclusion under section 911 automatically receive a two‑month extension to June 15. To further extend to October 15, they must still file Form 4868 by June 15. This dual-extension approach provides ample time to compile detailed Form 8938 data.
Penalties for Late or Non‑Filing
Failure to file Form 8938 timely or accurately can result in significant penalties:
- Late‑filing penalty: $10,000 if the statement is not filed by the due date.
- Continued failure: Additional $10,000 penalty for each 30-day period of continued noncompliance after IRS notice, up to $50,000 maximum.
- Accuracy-related penalty: 40% of the understatement of tax attributable to undisclosed foreign assets.
These penalties are separate from those for failing to file FBAR (FinCEN Form 114) and can stack if both forms are delinquent. Accurate and timely filing is essential to minimize exposure.
How to File Form 8938
Form 8938 must be attached to Form 1040 or Form 1040NR. Taxpayers should:
- Gather statements for all specified foreign assets, including maximum values during the year.
- Complete Part I (identification) and Part II/III (details of assets and income) as applicable.
- Transfer total values to the appropriate lines on Form 1040.
- Attach and submit electronically if e‑filing, or include with paper return if filing by mail.
Best Practices for Compliance
- Early Planning: Begin asset inventory by year-end to avoid last-minute rush.
- Coordinate with FBAR: Reconcile Form 8938 data with FinCEN Form 114 filings to ensure consistency.
- Use Professional Software: Leverage tax software that supports FATCA reporting.
- Maintain Documentation: Keep records of extension filings, asset valuations, and supporting statements for at least six years.
- Consult Experts: Engage an international tax advisor to navigate complex scenarios and minimize penalties.
Conclusion
Form 8938 is a critical component of FATCA compliance, designed to complement the FBAR and enhance transparency of U.S. taxpayers’ offshore holdings. By aligning its due dates with Form 1040 and leveraging extension options through Forms 4868 and the automatic foreign‑earned income extension, taxpayers can secure additional time to report accurately. Adhering to deadlines, understanding penalties, and following best practices will help ensure full compliance and reduce the risk of costly enforcement actions.
