What Types of Foreign Financial Assets Trigger FATCA Reporting (IRS Form 8938)?

If you own “specified foreign financial assets” as defined by the Foreign Account Tax Compliance Act (FATCA), you may have an obligation to report these assets to the Internal Revenue Service (IRS) using Form 8938. This form is due by April 15, but all taxpayers receive an automatic extension to October 15 if they miss the Tax Day deadline. In this article, Virginia offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group,  explains what types of foreign financial assets trigger the FATCA reporting requirement.

Specified Foreign Financial Assets Under FATCA

There are several types of specified foreign financial assets under FATCA. With that said, not all foreign assets trigger the obligation to file IRS Form 8938. Under FATCA, specified foreign financial assets include:

• Savings and checking accounts held with foreign financial institutions located abroad (accounts held with domestic branches of foreign financial institutions are not subject to FATCA)
• Brokerage accounts held with foreign broker-dealers located abroad
• Stocks and other securities issued by foreign entities held for investment outside of a financial account
• Any interest in a foreign entity, financial instrument or contract held for investment with an issuer or counterpart that is a foreign entity

Examples of specified foreign financial assets falling into the last two categories include stocks in foreign corporations; notes and bonds issued by foreign entities; swaps, options and derivatives issued by foreign entities; interests in foreign partnerships; interests in foreign retirement plans, deferred compensation plans and annuities; and, interests in foreign estates. As the IRS notes, these assets, “do not comprise an exclusive list of assets required to be reported,” but rather are simply among the most common assets reported on IRS Form 8938.

Foreign Assets that are Not Subject to Reporting Under FATCA

Several types of assets that may seem to be foreign financial assets fall outside of FATCA’s scope. For example, the following types of assets do not trigger an obligation to file IRS Form 8938 when held directly outside of a foreign account:

• Foreign currency
• Foreign real estate held for investment purposes
• Tangible assets held for investment purposes
• Gold and other precious metals
• An interest in a U.S. mutual fund that owns foreign stocks or other securities
• Financial accounts held by U.S. branches of foreign banks
• Financial accounts held by foreign branches of U.S. banks

Understanding the FATCA Reporting Thresholds

The last factor to consider when determining whether it is necessary to file IRS Form 8938 is whether a taxpayer’s specified foreign financial assets exceed the relevant FATCA reporting threshold. If any of a taxpayer’s reportable assets exceed the threshold, then the taxpayer must disclose all specified foreign financial assets on IRS Form 8938. In the words of the IRS, “If you meet the applicable reporting threshold, you must report all of your specified foreign financial assets, including the specified foreign financial assets that have a de minimis maximum value during the tax year.”

Contact Virginia Offshore Tax Lawyer Kevin E. Thorn

If you have questions about FATCA compliance, Virginia offshore tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, can help. To arrange a confidential consultation, please call 703-752-3752, email ket@thornlawgroup.com or request an appointment online today.