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Foreign assets: Which ones do you have to report on Form 8938?

This is a follow-up to a post we did last winter on filing requirements for foreign assets and income.

As we noted earlier, there are actually two sets of filing requirements that can come into play. The first set involves checking the appropriate box and filing Form 8938 as part of your regular income tax return. The second set involves filing FinCEN Form 114 (otherwise known as the FBAR) if you have offshore accounts that exceed certain valuation thresholds. We discussed this in our February 19 post.

In this post, we will elaborate further on the types of foreign assets that are subject to reporting on Form 8938.

Let's start with the most basic types of accounts. If you have a savings account or checking account in a foreign financial institution (FFI), you have to file Form 8938. The same is true of deposit accounts and brokerage accounts.

There are also numerous other types of assets that have to be included on Form 8938. For example, if you were issued stock or securities by a foreign entity, or have a partnership interest in such an entity, those assets have to be reported.

Many other assets, such as interests in a non-U.S. retirement plan or a foreign estate, have to be reported as well. In short, from basic savings accounts to highly sophisticated financial instruments, the U.S. is insistent on requiring U.S. taxpayers to report all of their worldwide assets and sources of income.

There are, however, some limitations on this insistence. For one thing, if your income is so low that you are not required to file a tax return, then you do not have to file Form 8938.

And if you own foreign real estate for a personal residence, you don't have to report that to the IRS. But it would be a different matter if ownership of the real property is through a foreign entity. Like many other scenarios in the complicated world of offshore compliance, that is a question best discussed with a skilled tax attorney.

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