Part I of Form 8938: Foreign Deposit & Custodial Accounts

Part I of Form 8938: Foreign Deposit & Custodial Accounts

Part I of Form 8938: Foreign Deposit & Custodial Accounts

Part I of Form 8938 

Form 8938 is an Internal Revenue Service Form that was developed to facilitate reporting under IRC 6038D. It requires US Taxpayers to complete international information reporting for Specified Foreign Financial Assets. The form was developed in accordance with FATCA (Foreign Account Tax Compliance Act) and was introduced in 2012 on the 2011 tax return. The term “assets” is a bit of a misnomer since it also includes Foreign Accounts — which overlaps with FBAR reporting and may result in some duplicative offshore disclosure. Form 8938 can be confusing, so we will go through each section of the form to explain the basics. This is the first part, which will focus on the Foreign Deposit and Custodial Accounts Summary section of the 8938 Form.

What is a Financial Account?

As provided by the Form 8938 Instructions:

      • A financial account is any depository or custodial account (under Regulations section 1.1471-5(b)(1)(i) or (ii)) maintained by a foreign financial institution as well as any equity or debt interest in a foreign financial institution (other than interests that are regularly traded on an established securities market) or any cash value life insurance or annuity contract maintained by an insurance company or other foreign financial institution.

      • A specified foreign financial asset includes a financial account maintained by a financial institution that is organized under the laws of a U.S. possession (American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands). Foreign financial institution.

      • In most cases, a foreign financial institution is any financial institution that is not a U.S. entity and satisfies one or more of the following. • It accepts deposits in the ordinary course of a banking or similar business.

        • It holds financial assets for the account of others as a substantial part of its business.

        • It is engaged (or holds itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.

Foreign Deposit & Custodial Accounts

The first part of Form 8938 for Foreign Deposit and Custodial Accounts summarizes the later section disclosure — which requires the US Taxpayer to provide detailed information about each account. As provided in the paragraph above:

      • A financial account is any depository or custodial account (under Regulations section 1.1471-5(b)(1)(i) or (ii)) maintained by a foreign financial institution as well as any equity or debt interest in a foreign financial institution (other than interests that are regularly traded on an established securities market) or any cash value life insurance or annuity contract maintained by an insurance company or other foreign financial institution.

Regulations section 1.1471-5(b)(1)(i) or (ii)

 The difference between Depository and Custodial Accounts:

Depository Account

(i) Depository account. Any depository account (as defined in paragraph (b)(3)(i) of this section) maintained by a financial institution;

Custodial Account

(ii) Custodial account. Any custodial account (as defined in paragraph (b)(3)(ii) of this section) maintained by a financial institution;

Part I Foreign Deposit and Custodial Accounts Summary

This section simply summarizes the later section involving the detailed reporting of deposit and custodial accounts:

      • Number of deposit accounts (reported in Part V

      • Maximum value of all deposit accounts

      • Number of custodial accounts (reported in Part V)

      • Maximum value of all custodial

      • Were any foreign deposit or custodial accounts closed during the tax year? Yes or No

Form 8938/FATCA  IRS Amnesty Programs

The Form 8938/FATCA Amnesty Programs are programs developed by the Internal Revenue Service to assist Taxpayers who are already out of compliance for non-reporting.

Some of the more common programs include:

Can I Just Start Filing Form 8938 This Year Instead?

No, unless the current year is the first year you had a Form 8938 Reporting requirement. If you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as a Quiet Disclosure. The IRS has warned taxpayers that if they get caught in a Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.

Our Form 8938/FATCA Lawyers Represent Clients Worldwide

Our International Tax Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure. 

Contact our firm today for assistance.

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