Form 8938 - Is this correct?

[MJ Sally]

Hello,

I know Turbotax fills out Form 8938, but after conducting extensive research, I believe I have a solid understanding of what I need to do for my Form 8938. If anyone can help me get to the right direction, I would truly appreciate it. Please note that this is a high-level overview of my plan. If I’m making any mistakes or missing something important, I’d appreciate any corrections or guidance.

Information to Input on Form 8938:

• Part 1 (Lines 5, 6, 9): Since we have both CDs and regular bank accounts, we need to report the total number of accounts and their combined maximum value during the year.
   

• Part 2 (Lines 10-11): 

  • We need to enter "1" in Line 10, as we have one foreign life insurance policy with a cash surrender value.

  • Line 11 will reflect its maximum value during the year.
     

• Part 3 (Line 13a): The only foreign income we earned was interest from our CD accounts. I believe we should report only the total interest earned from these accounts here.
   

• Part 4: (Skip) This section does not apply to our situation.
   

• Part 5: (Foreign Bank Accounts)

  • We need to report both open and closed foreign bank accounts.

  • For account type, we should select "Deposit" for all CDs and regular bank accounts.

  • We then provide the required details (institution name, account numbers, maximum values, etc.).
     

• Part 6 (Lines 29-34):

  • This section is for foreign financial assets that are not held in financial accounts.

  • Since we have a foreign life insurance policy with a cash surrender value, we need to report it here with all relevant details.
     

What We Do Not Need to Report:

• We own a rental property abroad, but from my understanding, this is not considered a financial asset for Form 8938 since it is personal property that we lease out. Therefore, it does not need to be reported on this form.

[DaveF1006]

Yes, from what I see, you've done a great job outlining your plan for Form 8938. Here are my observations and suggestions.  

 

1. Part 1 (Lines 5, 6, 9): You're correct that all foreign financial accounts, including CDs and regular bank accounts, must be reported with their combined maximum value during the year.
2. Part 2 (Lines 10-11): Your understanding of reporting the foreign life insurance policy’s cash surrender value is accurate. Remember to ensure the value reported is in U.S. dollars, converted using the appropriate exchange rate.
3. Part 3 (Line 13a): Reporting the total foreign interest earned from CD accounts aligns with the requirements. It's a good idea to double-check this figure against your income records and ensure it matches what's reported elsewhere, like on your tax return (e.g., Schedule B).
4. Part 5 (Foreign Bank Accounts): Yes, you'll need to report details for each foreign bank account, including those that were closed during the year. Selecting "Deposit" for CDs and bank accounts is correct. Ensure the information aligns with any corresponding FBAR (FinCEN Form 114) filings if applicable.
5. Part 6 (Lines 29-34): Including your foreign life insurance policy here sounds right. Be meticulous in providing all relevant details, such as the name of the financial institution and the account identifier.
6. What You Do Not Need to Report: You're correct that tangible assets, like foreign rental properties, are not considered financial assets for Form 8938 reporting purposes. However, ensure that any income derived from the rental property is reported on your tax return, as it is subject to U.S. taxation.