Who Must File the Form 8938, Specified Persons and Exceptions

Who Must File the Form 8938, Specified Persons and Exceptions

Who Must File the Form 8938 

The Form 8938 is used to report Specified Foreign Financial Assets to the IRS. It is a tax form that is filed in conjunction with a U.S. Person’s tax return. In other words, if a Taxpayer is not required to file a U.S. tax return, they are not required to file Form 8938 (although they may still be required to file the FBAR).

• “[I]f no income tax return required. If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold.”

One common question we receive is about who is required to file the Form 8938.  Let’s take a brief look at who must file Form 8938.

U.S. Persons File Form 8938

When a taxpayer is considered a U.S. person, then they may have a formal requirement to file Form 8938. But, the term ‘U.S. person’ is much more broad than some people may think – and it is not limited to only U.S. person individuals.

As provided by the IRS:

Who Must File Form 8938

• • “Unless an exception applies, you must file Form 8938 if you are a specified person (see Specified Person, later) that has an interest in specified foreign financial assets and the value of those assets is more than the applicable reporting threshold. If you are required to file Form 8938, you must report the specified foreign financial assets in which you have an interest even if none of the assets affects your tax liability for the year.”

Who is a Specified Person

Let’s dive into the different categories of ‘specified person’ as defined by the IRS:

Specified Person

• • “A specified person is either a specified individual or a specified domestic entity.”

Specified Individual

• • “You are a specified individual if you are one of the following.

    • • • A U.S. citizen.

        • A resident alien of the United States for any part of the tax year (but see Reporting Period, later).

        • A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return.

        • A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico. See Pub. 570, Tax Guide for Individuals With Income From U.S. Possessions, for a definition of bona fide resident.”

Resident Aliens

• • “You are a resident alien if you are treated as a resident alien for U.S. tax purposes under the green card test or the substantial presence test. For more information, see Pub. 519, U.S. Tax Guide for Aliens. If you qualify as a resident alien under either rule, you are a specified individual.”

Special rule for dual resident taxpayers

• • “If you are a dual resident taxpayer (within the meaning of Regulations section 301.7701(b)-7(a) (1)), who determines his or her income tax liability for all or a part of the tax year as if he or she were a nonresident alien as provided by Regulations section 301.7701(b)-7, file Form 8938 as follows.”

Specified individual filing as a nonresident alien at the end of his or her tax year

• • “You are not required to report specified foreign financial assets on Form 8938 for the part of your tax year covered by Form 1040-NR, provided you comply with the filing requirements of Regulations section 301.7701(b)-7(b) and (c), including the requirement to timely file Form 1040-NR, as applicable, and attach Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b).”

Specified individual filing as a resident alien at the end of his or her tax year

• •  “You are not required to report specified foreign financial assets on Form 8938 for the part of your tax year reflected on the schedule to Form 1040 or 1040-SR required by Regulations section 1.6012-1(b)(2)(ii)(a), provided you comply with the filing requirements of Regulations section 1.6012-1(b)(2)(ii) (a), including the requirement to timely file Form 1040 or 1040-SR and attach a properly completed Form 8833.”

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

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 who 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. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

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.