For form 8938: if bank account was recently closed and a new account with that balance opened, what should be balance reported for the closed account?

[GeoffreyG · Accepted solution]

If your (foreign) bank account was still open as of December 31st (the end of the tax year for the current filing season) then you would indicate that the account is still active, on Form 8938, even if you subsequently closed the account in the current calendar year (i.e., next year's tax filing year).  However, in the tax year in which you close the bank account, there is a place on Form 8938 to explicitly disclose that fact.  Please see the screen-capture images below this text for a visual illustration (simply click the images to open).

You would be asked what the maximum value of the account was during the year (and so during the time that it was open); but to answer your main question, the "current" balance of the closed account would, naturally, be $0 . . . if the account is actually closed, as of the end of the relevant tax year.

Certainly, though, that (closed) account's balance, if transferred to a newly-opened foreign bank account, will be separately reported as such on Form 8938, along with the actual balance.

Hopefully that answer makes sense for you; foreign accounts and the tax laws can be especially confusing sometimes.  Thank you for asking this question.

[Robert-B]

For me the posted answer does not answer the question asked which is the same as my question.

The question on Line 23 of form 8938 is "Maximum value of account during tax year." The question is not what is the current value at the end of the tax year.

If the account had $10,000 during the tax year before it was closed, wouldn't the "Maximum value of account during tax year" be $10,000?

Now if the $10,000 is transferred to another account then the maximum value of the new account during tax year would be $10,000.

Part I line 6 of form 8938 states, "Maximum value of all deposit accounts" which should include the closed account because it says "all deposit accounts" not just open accounts. Therefore the maximum value would be $20,000, wouldn't it?

To me this is an oversight in the 8938 form and hopefully the IRS software is smart enough to look at the  Part V section and see line 22 box b is checked and deduct the closed account value from the maximum value reported in Part I line 6, "Maximum value of all deposit accounts." This would be equivalent to putting a $0 for the closed account value but not strictly truthful as the maximum value in the tax year for the closed account was actually $10,000.

Any clarification on this confusing question would be much appreciated.

[DaveF1006]

Yes, in line 6, the way the question is structured, you would record  $20,000 as being the maximum value of all deposit accounts, since these are two separate accounts.

In line 23, you would provide information for the closed account and then indicate it was a closed account by placing the check mark in the appropriate box. Then you need to prepare an additional statement for the account that the money was transferred to and select account opened during the tax year.

[Robert-B]

Thank you Dave, much appreciated, I agree with your reply.

Initially line 6 looks incorrect because it is twice the actual amount I have but by strictly following the guidelines in the form it is providing what the IRS is asking for. By checking the appropriate account close and open check boxes hopefully provides the IRS with the information they are looking for.

I will update this post if I get a negative response from the IRS.