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What tax forms does the IRS require for foreign assets?

The Internal Revenue Service (IRS) requires taxpayers to report certain foreign assets. In most cases, the first required step involves checking a box to acknowledge the ownership of such assets on the Form 1040 tax return — but this is only the beginning. In some cases, the agency requires taxpayers file additional forms.

These forms can include:

 

  • Form 1040. There are certain foreign assets the IRS requires taxpayer’s report directly on their 1040. In addition to checking the box acknowledging these assets as noted above, a taxpayer may need to report income from rental properties owned abroad on Schedule E.
  • FinCEN Form 114. More commonly known as the Foreign Bank Account Report Form (FBAR), this form requires the taxpayer to report all foreign financial accounts.
  • Form 8938. Also known as the Foreign Account Tax Compliance Act (FATCA) Form, Form 8938 requires the report of all foreign financial assets, not just accounts. This for extends to include the reporting of things like shares in a business.

As a general rule, the IRS requires taxpayers file an FBAR when they own assets with a value at or above $10,000 at any point during the tax year. The agency generally requires any taxpayer who resides within the United States with a threshold at the end of the year of $50,000 or over if single or $100,000 or more if married to file a Form 8938. However, the government also requires the form if the value was at or above $75,000 for a single filer or $150,000 for married returns at any point during the applicable tax year. The agency applies a different set of rules for those who live outside of the U.S.

If the process still seems confusing, you are not alone. These rules are difficult to navigate. An attorney experienced in disclosure procedures for unreported foreign assets can review your situation and discuss the best course of action for compliance.

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