Form 8938 thresholds and First Year choice

[NewTaxResident]

Hi all,

I need advice on US tax filing on Form 8938 requirement. My wife and I moved from Brazil to the US on November 7, 2023, on W2 job.

In 2023 tax year, we're electing to be treated as US tax residents from our move date (First Year Choice) filing jointly. We were Brazilian tax residents for whole year of 2023 and previous years.

My question is about Form 8938 Presence Abroad test. Are we considered Taxpayers living outside the United States in our situation? Determining that is crucial to determine the applicable Form 8938 reporting threshold - $100,000 for Taxpayers living in the United States vs $400,000 for Taxpayers living outside the United States.

As a reference this is the Presence Abroad test taken from the IRS Form 8938 Instructions. I wonder if we meet the second criteria?

"Presence abroad. You satisfy the presence abroad test if you are one of the following.
• A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

• A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported."

Thanks for any help you can provide!

[pk]

@NewTaxResident  just to recap on what I understand of your situation:

(a) you  ( and your spouse) came to US on a work visa ( which type please ?) on Nov. 7th of 2023.  Thus  you would have been a Non-Resident for tax purposes.  However, since you have met the  SPT for the year 2024, you now wish to exercise  the first year choice for 2023 filing --yes ?

(b)  you own/operate/control one or more bank / financial account(s) or own specified financial assets in Brazil, thus coming under the FATCA and FBAR regime/requirements.

Noting that:     (1) both FBAR and FATCA regs require the taxpayer to be a US person ( citizen/GreenCard/Resident for tax purposes) during the period of reporting;   (2) there is no tax consequences on owning/recognizing  FBAR/FATCA assets but reporting being mandatory;

I would follow the general adage " when in doubt" do the needful  i.e. file the reports  when in doubt.

But more specific answer, please consider answering my request fore more information.  Please note that  there is NO tax treaty between US and Brazil.

I will circle back once I hear from you --yes ?

muito obrigado

[NewTaxResident]

Hi @pk @Anonymous_ ,

Thanks for your reply. To answer your questions:

a) What visa type: L1A

a) However, since you have met the  SPT for the year 2024, you now wish to exercise  the first year choice for 2023 filing --yes ? Yes

b) you own/operate/control one or more bank / financial account(s) or own specified financial assets in Brazil, thus coming under the FATCA and FBAR regime/requirements. Yes

I'd prefer to avoid form 8938 if I don't have to do it because it is a lot of work.

I appreciate any help you can provide.

Thanks!

[pk]

@NewTaxResident , Neiter FBAR nor FATCA has any tax implications.  However, if either of these forms is required then ignoring the requirements  can be VERY expensive -- onerous fines.

Also that while FBAR requires one to  visit  www.FinCen.gov to file online  to file the form 114,  FATCA  form 8938  will be automatically  filled out by TurboTax  -- yes there is lot of work on the first time but thereafter it is kind of routine update.  To add to this almost all  banks world over share data with US treasury on ALL US residents.  So I would strongly suggest not to ignore this.

I attach herewith an IRS page  comparing and describing the requirements for each of these forms -->

Comparison of Form 8938 and FBAR requirements | Internal Revenue Service (irs.gov)

Is there more I can do for you ?

[NewTaxResident]

@pk 

My question is about Form 8938 Presence Abroad test. Are we considered Taxpayers living outside the United States in our situation? Determining that is crucial to determine the applicable Form 8938 reporting threshold - $100,000 for Taxpayers living in the United States vs $400,000 for Taxpayers living outside the United States.

My wife and I moved from Brazil to the US on November 7, 2023, on L1A visa. In 2023 tax year, we're electing to be treated as US tax residents from our move date (First Year Choice) filing jointly. We were Brazilian tax residents for whole year of 2023 and previous years.

As a reference this is the Presence Abroad test taken from the IRS Form 8938 Instructions. I wonder if we meet the second criteria?

"Presence abroad. You satisfy the presence abroad test if you are one of the following.
• A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

• A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported."

Thanks for any help you can provide!