IRS Form 8938 Penalties

While the purpose of Form 8938 is merely for the disclosure of information relating to specific foreign financial assets and not for the calculation of taxes, severe civil and criminal penalties are tied to the failure to timely file or disclose all applicable assets on Form 8938.

Failing to submit Form 8938 in a timely manner warrants a minimum $10,000 civil penalty. This penalty increases by $10,000 each 30-day interval subsequent to notification of failure to file by the U.S. Treasury Department following a 90-day compliance grace period. This penalty is not to exceed a maximum of $50,000. Married persons filing a joint return should be aware they are individually subjected to the penalties, while liability for the penalties is bound both joint and several. Additionally, criminal penalties may apply.

When federal tax underpayment occurs due to an undisclosed asset, a 40% penalty is applied to the deficiency. If it is determined that the underpayment was a result of fraud, the deficiency becomes subject to a 75% penalty. Further, failure to disclose $5,000 or more of income originating from assets required to be reported on Form 8938 expands the audit statute of limitations to six years from the date of filing.

The steep penalties tied to Form 8938 make it imperative for taxpayers potentially subject to them to receive competent legal counsel from a tax law firm such as Moskowitz LLP when negotiating these costly tax issues.

Also see: IRS Form 8938, IRS Form 8938 Filing Requirements

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