U.S. EXPAT TAX GUIDE – GERMANY
Who is required to file Form 8938 while living in Germany?
US citizens and green card holders residing in Germany must file Form 8938, Statement of Specified Foreign Financial Assets, if their total foreign holdings exceed certain thresholds. This form is included with your annual tax return, specifically attached to Form 1040.
Form 8938 is essential for reporting various types of foreign assets, including cash and investments, to ensure transparency with the IRS.
Table of contents
What assets count towards the filing threshold for Form 8938?
When determining whether you need to file Form 8938, consider all your foreign financial assets. This list includes but is not limited to, bank accounts, stocks, securities, and pensions. Since the specifics can get complex, particularly with pensions potentially pushing you over the limit, consulting with a tax professional can clarify which assets count and whether you meet the filing requirements.
What are the filing thresholds for Form 8938?
The thresholds for filing Form 8938 vary based on your filing status:
- Single or Married Filing Separately: You must file if your foreign assets exceed $200,000 on the last day of the tax year or US$300,000 at any time during the year.
- Married Filing Jointly: The threshold is higher, requiring filing if your combined foreign assets were more than US$400,000 on the last day of the year or US$600,000 at any point during the year.
What penalties apply if you don’t comply with Form 8938 filing requirements?
The penalties for failing to file Form 8938 are sizeable:
- An initial penalty of US$10,000 may be applied if you don’t file Form 8938.
- If non-compliance continues after IRS notification, you could face an additional penalty up to $US50,000.
- Furthermore, if not disclosing foreign assets leads to an understatement of your tax bill, you might also face a penalty of 40% of the understatement.
Additionally, failing to file Form 8938 can prompt the IRS to extend the statute of limitations to six years for your entire tax return, which allows them more time to audit and potentially amend previous tax filings.
Given these potential consequences, ensuring accurate and timely filing of Form 8938 is crucial. Consulting with a tax advisor who specializes in expatriate tax issues can help you navigate these complexities effectively.
Why partner with a specialist Expat accountant?
Living outside of the US can make your tax filing requirements complicated. To ensure you pay the minimum amount of taxes, it’s critical to work with an accountant who understands every aspect and avenue for reducing your tax liability. We have a dedicated team of tax accountants who work exclusively with US expats earning and investing in Germany. Partnering with a specialist expat accountant can help you navigate complex tax regulations and optimize your tax situation.
