What businesses must file Form 8938, Statement of Specified Foreign Financial Assets?
Form 8938 is filed by some US taxpayers, including certain closely held businesses with passive foreign assets. This helps the IRS to monitor offshore funds held by US taxpayers.
A business must file Form 8938 if:
It's a specified domestic entity, and
It has specified foreign financial assets that must be reported.
What's a specified domestic entity?
A specified domestic entity is:
A closely held corporation or partnership with significant passive income or significant passive income sources, or
A domestic trust with a specified domestic entity or specified individual as a beneficiary
Domestic entity generally means created in or under the laws of the US.
Closely held means that a specified individual owns more than 80% of the corporation’s stock or the partnership’s capital. A specified individual is a US citizen, resident alien, or certain nonresident alien.
Significant passive income means at least 50% of specified foreign asset gross income is passive income, like dividends, interest, most royalties and rent, and certain gains.
Significant passive income sources means at least 50% of the specified foreign assets produce passive income. For more info on this percentage, see page 3 of Percentage of passive assets held by a corporation or partnership.
What's a specified foreign financial asset?
An account with a foreign financial institution, but not its US branch
Stock or securities, if not issued by a US person
Any interest in a foreign entity, and
Any financial instrument or contract from a non-US party
Income and asset values in foreign funds must be converted to US dollars when used for this form.
These terms and others are covered in greater detail in the Instructions for Form 8938:
Financial Account
Foreign financial institution
Other Specified Foreign Financial Assets
Assets Not Required To Be Reported
When are specified foreign financial assets required to be reported?
A specified domestic entity files Form 8938 when its total specified foreign financial asset value is:
More than $50,000 on the last day of the tax year, or
More than $75,000 at any time during the year
How do I file Form 8938?
Form 8938 is filed with the entity’s annual tax return by the filing due date (including extensions) for that return.
More summary info can be found at Do I need to file Form 8938, Statement of Specified Foreign Financial Assets?
