# form 8938



## berniej

do you also have to file a 8938 this year along with then fbar and when does it have to be inthanks

Bernie


----------



## Bevdeforges

Take a look at the IRS information page on form 8938 Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets??

This came out rather late in the game. Basically, they have raised the threshold on this one to $200,000 for a single person and $400,000 for a couple filing jointly - if resident outside the US. (Read through the document - there are a few additional points to consider.)

The 8938 and related forms are to be filed with your income tax returns. These forms are NOT filed separately like the FBARs are. And, if you don't have to file a tax return (usually because your income doesn't meet the threshold requirements) then you don't have to file these forms at all, no matter how much in reportable assets you own.
Cheers,
Bev


----------



## berniej

Thanks,don't have that much so thats at least one form I don't have to use.

Thanks


Bernie




Bevdeforges said:


> Take a look at the IRS information page on form 8938 Do I need to file Form 8938, ?Statement of Specified Foreign Financial Assets??
> 
> This came out rather late in the game. Basically, they have raised the threshold on this one to $200,000 for a single person and $400,000 for a couple filing jointly - if resident outside the US. (Read through the document - there are a few additional points to consider.)
> 
> The 8938 and related forms are to be filed with your income tax returns. These forms are NOT filed separately like the FBARs are. And, if you don't have to file a tax return (usually because your income doesn't meet the threshold requirements) then you don't have to file these forms at all, no matter how much in reportable assets you own.
> Cheers,
> Bev


----------



## Ladyhawk

My assets came to just below the threshold, so i don't have to file. I considered doing it anyway, in case the IRS found I had erred in some way and should have filed it, because that way I would show willingness, and also would avoid the Severe penalty for failure to file. But then I read the form - egad, how could they possibly make things more complex than they already were?? So I'll skip it this year. The IRS has to actually deal with these new forms for a year before they realize the problems they cause and decide how to correct them, so I'm glad I do not have to report this - who knows what snafus I'll avoid?


----------



## byline

Ladyhawk said:


> But then I read the form - egad, how could they possibly make things more complex than they already were??


That's how I felt when filling out Form 3520 (for my lonely little tax-free savings account, which will be at a zero balance by summer so that I don't have to go through this mess again). I was also notified by the IRS that I needed to fill out Form 1041 (also for my TFSA) going back to 2009. Another unbelievably complicated form! I filled them all out to the best of my ability. *sigh*


----------



## Bevdeforges

byline said:


> That's how I felt when filling out Form 3520 (for my lonely little tax-free savings account, which will be at a zero balance by summer so that I don't have to go through this mess again). I was also notified by the IRS that I needed to fill out Form 1041 (also for my TFSA) going back to 2009. Another unbelievably complicated form! I filled them all out to the best of my ability. *sigh*


I'm curious how a "lonely little tax-free savings account" was subject to a form 3520. My understanding is that this form is only for foreign trusts.
Cheers,
Bev


----------



## Ladyhawk

*PFICs*

I'm curious too because I am so ignorant about the classification of investments. Is a mutual fund a "foregn trust"? Or an ETF? If so, they could be in a TFSA. What forms are needed for mutual funds? I sold mine this year b/c they are PFICs and reporting on them is apparently complex. What is needed to report on income from a mutual fund and also then for selling one? I've reported the sale of the fund under the capital gains forms on Turbo tax.






Bevdeforges said:


> I'm curious how a "lonely little tax-free savings account" was subject to a form 3520. My understanding is that this form is only for foreign trusts.
> Cheers,
> Bev


----------



## maz57

I'm no expert on all of this, but it's my belief that some TFSA's are trusts; some are not. I had one a few years back (which, mercifully I cashed out long before I had even heard of this US tax issue) for which every year the financial institution sent me a statement of trust plus annual transaction activity. I believe one in which you can hold stocks, mutual funds, ETF's or other investments would definitely be a trust. 

I have one now that sends no such paperwork; only a simple statement of interest paid just like any other savings account. Because it is tax free in Canada it doesn't generate an information slip like a regular account and doesn't even appear of my my Canadian return. (Funds contributed to a TFSA are after tax dollars, create no deduction from income when they are contributed, gains within are not taxable, and funds withdrawn are not taxable.) The account is listed under one account number along with several other accounts with the same institution. 

For US purposes I add the income from all accounts under that account number and report that on Schedule B. Whether or not I'm doing it right I have no idea, but at least I can't be accused of failing to report income. That's the trouble with trying to serve two tax masters; the two tax codes do not mesh with each other. With the IRS nothing is ever simple.

Thank God the only mutual funds I own are within RRSP's and covered by the 8891's. The IRS should really allow TFSA's to be reported in similar fashion, but it will take decades before they get around to it. I have rearranged my finances to make US reporting easier, but I resent being denied some of the strategies which other Canadians can take advantage of. And all of this ridiculous reporting to produce a $0 balance return every year.


----------



## Mona Lisa76

Bevdeforges said:


> I'm curious how a "lonely little tax-free savings account" was subject to a form 3520. My understanding is that this form is only for foreign trusts.
> Cheers,
> Bev


This is also what my accountant thinks...she doesn't think that cash ISAs or even share ISAs require this form, thank goodness. I also know that some argue that personal pension schemes could be arguably foreign grantor trusts but, again, my accountant is invoking the UK/US tax treaty that allows for tax-free growth in pension funds. My financial planner recommended that I consolidate my personal pension into my new employer's pension scheme that my employer opened up for me earlier this year.


The investment ISAs still had foreign tax credits for the dividends whereas the Cash ISAs showed no tax credit so were fully taxable to the IRS.

I should imagine that even in a worst case scenario, were the IRS to question why I didn't submit these 3520/3520A forms that I could argue reasonable cause, especially as I had a specialized accountant deal with my returns.


----------



## byline

Bevdeforges said:


> I'm curious how a "lonely little tax-free savings account" was subject to a form 3520. My understanding is that this form is only for foreign trusts.


Both my accountant from last year and my H&R Block tax preparer this year told me that tax-free savings accounts are, indeed, considered foreign trusts, and so must be reported that way. The difference of opinion between the two is that last year's accountant felt that, for anyone getting rid of their TFSAs, those folks shouldn't have to file this form. It should be only for those who intend on _keeping_ their TFSA. My H&R Block tax preparer has a more rigid take on the rules and insists that everyone has to file that form, regardless of what they're doing with their TFSA. I have no idea who's right; I'm just trying to be in compliance, so I'm erring on the side of caution.


----------



## byline

maz57 said:


> I have rearranged my finances to make US reporting easier, but I resent being denied some of the strategies which other Canadians can take advantage of. And all of this ridiculous reporting to produce a $0 balance return every year.


Same here. It's especially galling that my Canadian husband and I can't simplify our estate planning and have both of our names on all our financial accounts, so as to avoid probate issues later on. But no, if I did that, then I would have to report all of _his_ accounts, as well. I'm having a hard enough time keeping up with those that are in my own name. This is one of the reasons why I am considering renunciation far more seriously than I ever thought I would.


----------



## Bevdeforges

byline said:


> Both my accountant from last year and my H&R Block tax preparer this year told me that tax-free savings accounts are, indeed, considered foreign trusts, and so must be reported that way. The difference of opinion between the two is that last year's accountant felt that, for anyone getting rid of their TFSAs, those folks shouldn't have to file this form. It should be only for those who intend on _keeping_ their TFSA. My H&R Block tax preparer has a more rigid take on the rules and insists that everyone has to file that form, regardless of what they're doing with their TFSA. I have no idea who's right; I'm just trying to be in compliance, so I'm erring on the side of caution.


There are a number of IRS forms specifically for requesting special treatment for Canadian investment instruments. I don't know all the details, but check the IRS website to see what you can come up with.

I have my doubts about what you've been told. There are a number of tax free savings accounts here in France, offered by the banks, that AFAIK are simply savings accounts in the eyes of the IRS. I happen to have two such accounts and I just report them like ordinary old savings accounts.

Because I exclude my "earned income" the interest on my various bank accounts falls well under the exemption and standard deduction amounts, so I don't wind up paying any taxes to the IRS - and the French accounts are tax free here for French tax purposes. I don't see why you couldn't simply report your tax free savings accounts that way.
Cheers,
Bev


----------



## byline

Bevdeforges said:


> I have my doubts about what you've been told. There are a number of tax free savings accounts here in France, offered by the banks, that AFAIK are simply savings accounts in the eyes of the IRS. I happen to have two such accounts and I just report them like ordinary old savings accounts.


Well, all I can tell you is that two different firms -- one a mid- to upper-range accounting firm in Halifax, the other H&R Block -- told me the same thing. So maybe it's a different situation in Canada, or maybe it pertains to the specific type of TFSA that I have. I don't know. And it doesn't really matter. As of this summer, it will be gone anyway. We're incrementally putting into my RRSP.


----------



## Omater

*For confirmation please...*

This form is giving me the same kind of headache that FBAR did. I read through the IRS "Do I need to file Form 8938" ... all the if's and's or buts just boggles the mind. Just as I am convinced I am going to have to file it, I look at this:

If you are a taxpayer living abroad you must file if:

You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or

So does this mean that I don't have to file if accounts are under the $200k? Are the rules pretty much the same as FBAR and I have to include my husbands (joint) accounts in the total? ?

This is the same double talk that caused me an issue when I was told that if I owed no tax that I didn't have to file a tax return. Years later I find myself filing back returns. I just want to be sure that I don't end up being penalized because I "thought" I didn't have to file 8938. 

Thanks!


----------



## Mona Lisa76

Omater said:


> This form is giving me the same kind of headache that FBAR did. I read through the IRS "Do I need to file Form 8938" ... all the if's and's or buts just boggles the mind. Just as I am convinced I am going to have to file it, I look at this:
> 
> If you are a taxpayer living abroad you must file if:
> 
> You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
> 
> So does this mean that I don't have to file if accounts are under the $200k? Are the rules pretty much the same as FBAR and I have to include my husbands (joint) accounts in the total? ?
> 
> This is the same double talk that caused me an issue when I was told that if I owed no tax that I didn't have to file a tax return. Years later I find myself filing back returns. I just want to be sure that I don't end up being penalized because I "thought" I didn't have to file 8938.
> 
> Thanks!


 I definitely need to file it because my overseas assets are worth more than $200,000 but not sure how jointly owned assets are treated as mine are only in my name. I had the impression that even when jointly owned that the entire worth rather than just your half of the accounts had to be declared though could be mistaken. Perhaps Bev knows.


----------



## Bevdeforges

If your accounts total less than the 200k threshold then you don't have to file. The 8938 form is entirely separate from the FBAR form and serves a different function.
Cheers,
Bev


----------

