Form 8938, also known as the "Statement of Specified Foreign Financial Assets," is used to report your foreign financial assets to the IRS. When the form asks if your foreign financial accounts had income, deductions, or credits associated with them, it is referring to any financial activity related to those accounts. Here are some examples:
- Income: This includes interest, dividends, capital gains, rental income, or any other type of income generated from your foreign financial accounts.
- Deductions: These could be expenses related to managing or maintaining your foreign financial accounts, such as fees or commissions.
- Credits: This refers to any foreign tax credits you might be eligible for due to taxes paid to a foreign government on income earned from your foreign financial accounts.
Essentially, the form is asking if there was any financial activity in your foreign accounts that needs to be reported on tax return. If your accounts were dormant during the year without any financial activity, then you would say no to this question.
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