Determining the Reporting Threshold That Applies for filling IRS form 8938

[prouddesi]

I have aquestion about Determining theReporting Threshold That Applies to me for filling the form 8938 with taxreturns with IRS. Can anybody please clarify this.
I am unmarriedtaxpayer living in the United States. As per the form 8938 instruction it saysthat

If you are not married and living abroad,you satisfy the reporting threshold only if the total value of the specifiedforeign financial assets is more than $50,000 on the last day of the tax yearor more than $75,000 at any time during the tax year.

I am trying tounderstand the above statement.
For example I have$30000 in a bank A and $19,000 in bank B in the beginning of thefinancial year. The total being $49,000. (let us assume it is 0%interest for sake of simplicity.)
Let us say I remove$29,000 from bank A and deposit in a new account in bank C in themiddle of the year and do nothing after that.

Which of the 2below methods I need to use ?

Method 1
Maximum ofAccount A in that year + Maximum of Account B in that year + Maximum of AccountC in that year
Which will be $30,000+ $19,000 + $29,000 = $78,000 (In that case I need to fill in the form 8938)

Method 2.
At any given timeof the year, take the available total in each account.
In that case beforetransferring the money to new account C the total was ($30000 + $19000) $49,000 and hence not required to fill in the form8938.
In the case aftertransferring the money to new account C the total was ($1000 + $19000 + $29000= $49,000 and hence not required to fill in the form 8938.

Thanks in advance.

[dbs]

Logically your "total value of the specifiedforeign financial assets " is less than the specified limit and hence no need to file.

But usa has its own logic. Hopefully some one more knowledgable will provide the answer.

[prouddesi]

Thanks DBS. So we should use method 2?

Gurus please weigh in with your opinions.

[manenkothari]

Hello Proud desi,

Rules for FBAR and Form 8938 are confusing sometimes.

While you need to report maximum balances on FBAR irrespective of duplication. But to determine reporting requirements you need to consider the total value of all financial accounts. Similary, to determine reporting requirements for form 8938, you need to consider the total value of all financial assets (not only accounts). So I think, duplication are not required to be included. Total value of all financial assets in your example is 49K for all the times.

If total financial assets are close to the filing requirements, we still recommend to file form 8938 for several reasons including wide definition of financial assets. Marking Sch B in either case is still important.

Manen,
Manendra Kothari, CPA
SK Tax Associates, CPAs
www.Indiancpa.US
Ph: 847.524.0001

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