Do you know what the penalties are for not filing Form 8938? If not, you are not alone. Many taxpayers are unaware of the consequences of not filing this important document.
At Creative Advising, we specialize in helping taxpayers understand the complexities of filing taxes and the potential penalties associated with not filing. In this article, we will provide a comprehensive overview of the penalties associated with not filing Form 8938.
Form 8938 is an important form used to report foreign financial assets. It is a requirement for taxpayers who have certain foreign financial assets that exceed certain thresholds. Failure to report foreign financial assets can result in significant penalties.
We will discuss the penalties associated with not filing Form 8938, the types of assets that need to be reported, and the thresholds that must be met in order to be required to file the form. We will also provide tips on how to avoid these penalties and ensure that your taxes are filed correctly.
By the end of this article, you will have a better understanding of the penalties associated with not filing Form 8938 and how to avoid them. So, let’s get started!
What Types of Assets Must be Reported on Form 8938?
When filing Form 8938, individuals and corporations must report financial assets such as: bank accounts, investment accounts, stocks and bonds, life insurance contracts, foreign partnerships, and foreign trusts. Any asset located outside of the United States must be reported on this form, regardless of the total value of the asset.
Form 8938 does not report most real estate holdings and tangible assets located outside of the United States. Foreign real estate holdings may still need to be reported on other forms, such as Form 3520/3520-A for trusts and Form 5471 to report foreign corporations.
Form 8938 also does not report domestic financial assets located within the United States. Domestic assets must be reported on other forms, such as Schedule B (Form 1040 or 1041) to report interest and dividend income, or Form 36B to report foreign pension plans.
What are the Penalties for Not Filing Form 8938?
The consequences of not filing Form 8938 can be severe. You may face civil or criminal penalties, including an additional failure-to-file penalty of up to $50,000. If you willfully fail to file Form 8938, you may face criminal penalties, including a fine of up to $250,000 or jail time of up to five years, or both.
In addition, the IRS can increase the total amount of penalties if the unreported assets generate income, such as interest or dividends. You may be responsible for late filing or late payment penalties, plus 40% of any additional taxes due based on the unreported amount.
The IRS will impose these penalties on individuals and corporations who fail to file Form 8938 or underreport their assets on it. It is important to pay close attention to the filing requirements and consult with an experienced financial professional if you are unsure.
What are the Filing Requirements for Form 8938?
When it comes to filing U.S. taxes, there are certain forms and filing requirements depending on the situation. Form 8938 is one such form—it’s the Statement of Specified Foreign Financial Assets form, and it must be filed by US taxpayers if they meet certain thresholds of foreign financial assets.
The filing requirements for Form 8938 depend on whether the taxpayer is single, married or living with someone, and the value of their foreign financial assets. If the value of foreign financial assets surpasses $50,000 on the last day of the year or more than $75,000 at any time during the tax year, then the taxpayer will need to file Form 8938. In addition, if the taxpayer is married filing jointly, higher thresholds apply.
Taxpayers should be mindful of the filing requirements for Form 8938—failing to do so is costly, as discussed in the next section.
What are the Penalties for Not Filing Form 8938?
The Internal Revenue Service is serious about taxpayers filing Form 8938—any neglect to do so is punishable by steep penalties. According to the IRS, the penalty for not filing Form 8938 or filing a faulty form is $10,000. Furthermore, if the taxpayer not only fails to file but also does not comply with the IRS request to file the form, then an additional penalty of $10,000 per 30-day period may be issued, up to a maximum penalty of $60,000.
It’s clear that the IRS takes this form seriously, and US taxpayers should also be mindful of filing requirements. The best bet to avoid hefty penalties is to file the form on time if one is required to do so.
What are the Penalties for Not Filing Form 8938?
Failure to file Form 8938 can have severe financial consequences. The penalties for not filing Form 8938 may include an accuracy related penalty of up to $10,000, with additional penalties of up to $50,000 for any continued failures, or a delinquency penalty equal to the greater of 5 percent of the value of any non-disclosed foreign financial asset for each 30-day period the return is late. Penalties may also include a civil fraud penalty, as well as criminal penalties. These penalties can be very costly and can interfere with the normal functioning of your business. Therefore, it is important for individuals and businesses to file Form 8938 accurately and timely.
The penalties for not filing Form 8938 can also include loss of certain tax deductions, credits, and exclusions that would otherwise be available. For instance, if the Form 8938 is not filed by the due date, any foreign tax credit taken for taxes paid for or on account of the assets required to be reported will not be allowed. In addition, any deduction or exclusion that would be available for a properly-filed Form 8938 will be dropped and disallowed. Lastly, a failure to file Form 8938 may result in the disallowance or disgorgement of certain income items, such as foreign-source income, which would prevent taxpayers from benefiting from any foreign tax credits associated with those income items.
It is therefore imperative for taxpayers to ensure they meet their filing requirements and submit Form 8938 in a timely manner. Doing so can help them avoid costly penalties that may otherwise be imposed.
How to Avoid Penalties for Not Filing Form 8938?
To avoid potential penalties for not filing Form 8938, it’s important to stay up-to-date on which foreign financial accounts, assets, and investments require reporting and understand the associated rules for filing the form. To start, individuals must identify their reportable assets and determine whether they exceed the filing requirement thresholds. Keep in mind, even if an individual is not required to file Form 8938, it may still be beneficial, in some cases to do so.
As non-compliance can lead to severe penalties, it’s essential to become and remain informed about filing Form 8938. Those who fail to file may face both civil and criminal penalties. Depending on the situation, penalties range from $10,000 to $60,000 with the possibility of criminal prosecution and capital penalties. Fines apply for each failure-to-file, and upon assessment, the IRS may also impose additional fines of up to $12,547 for assessment-related underpayments.
Therefore, it’s essential to understand your reportable assets and the required filing thresholds, as well as the filing rules and requirements associated with Form 8938. Keeping up-to-date with this information can help you avoid the potential penalties associated with failing to file Form 8938. Tom Wheelwright and the team at Creative Advising have extensive experience advising both business and individuals on filing obligations and reporting, and are happy to consult anyone looking for assistance.
How to File Form 8938?
Form 8938 is simple to file. Generally, all you need to do is attach the form to your annual tax return when you submit it. You will need to include all the information about your foreign financial assets that the form requires. All you need to complete the form is information about the assets you own or control, such as bank and security statements.
Penalties for not filing Form 8938 are quite severe. Currently, the IRS can impose a penalty of up to $10,000 per year for failure to file this form. This penalty can add up quite quickly, so it’s important to make sure your form is filed and up-to-date. Additionally, taxpayers who file late can be assessed an additional penalty of up to $10,000 for each 30-day period their filing is late, up to a maximum of $50,000.
In short, filing and reporting your foreign financial assets is essential; failure to do so can result in hefty penalties. To ensure your filing is done properly, it’s always a good idea to talk to an experienced Certified Public Accountant. A CPA can ensure your forms are complete and submitted properly, so you can avoid costly penalties.
“The information provided in this article should not be considered as professional tax advice. It is intended for informational purposes only and should not be relied upon as a substitute for consulting with a qualified tax professional or conducting thorough research on the latest tax laws and regulations applicable to your specific circumstances.
Furthermore, due to the dynamic nature of tax-related topics, the information presented in this article may not reflect the most current tax laws, rulings, or interpretations. It is always recommended to verify any tax-related information with official government sources or seek advice from a qualified tax professional before making any decisions or taking action.
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