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Discussion Starter · #1 ·
I recently discovered an error in my 2015 return.
My fault I will file a 1040X.

The sum was around $2400, will I just pay this plus interest or will there be a fine as well?

The amounts on the original 8938 part 1 and part111 will now differ; do I need to submit another 8938 with the 1040X? It is 17 pages!!

In trying to reduce the burden, I rechecked the historic exchange rates.
During 2015 I used a monthly bank average x-rates.com (I think) for my 1040.
FWIW, the IRS gives a much better average year rate.
 

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The amounts on the original 8938 part 1 and part111 will now differ; do I need to submit another 8938 with the 1040X? It is 17 pages!!
Bev has been uncharacteristically silent on this question. And I don't know, having never had to file any 8938. Sorry. Nevertheless, I'll throw out some pointers, which you can of course ignore entirely, and which may be suspect anyway...

As always with the IRS there is an 'accuracy related penalty' for form 8938. And again as always where the IRS and anything foreign intersect this is a rather 'excessive' 40% of tax underpaid (a "reasonable cause" exception is possible). Compare to a maximum of around 25% or so for US domestic accounts.

Knowing this penalty rate might affect your decision here. It is not unusual for the overly high 'offshore' penalty rates employed by the IRS to discourage, rather than encourage, compliance. (Put less subtly, as you are not in the US, could they know about this if you didn't tell them? FATCA might suggest that yes, they could; but also it might not, depending on the country, type of account, account balance, etc.)

If faced with this personally, my own inclination might be to, ummm, "accidentally" overlook the need for any 8938 change, and just file the 1040X and pay the extra tax due. It is then easy to convince oneself that there is no resultant actual underpayment of tax, and so the 8938 penalty no longer applies. Rather contrived I know, but since the letter of the law is so unreasonable here, living within the spirit of it seems entirely defensible.

If you do go ahead and redo the 8938, hopefully you used tax software so that generating it isn't a huge manual burden. If the end result is 17 pages of extra pointless paper going to the IRS, at least then you can then mildly congratulate yourself for having thrown just a little extra grit into its gears.
 

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Discussion Starter · #3 ·
Bev has been uncharacteristically silent on this question. And I don't know, having never had to file any 8938. Sorry. Nevertheless, I'll throw out some pointers, which you can of course ignore entirely, and which may be suspect anyway...

As always with the IRS there is an 'accuracy related penalty' for form 8938. And again as always where the IRS and anything foreign intersect this is a rather 'excessive' 40% of tax underpaid (a "reasonable cause" exception is possible). Compare to a maximum of around 25% or so for US domestic accounts.

Knowing this penalty rate might affect your decision here. It is not unusual for the overly high 'offshore' penalty rates employed by the IRS to discourage, rather than encourage, compliance. (Put less subtly, as you are not in the US, could they know about this if you didn't tell them? FATCA might suggest that yes, they could; but also it might not, depending on the country, type of account, account balance, etc.)

If faced with this personally, my own inclination might be to, ummm, "accidentally" overlook the need for any 8938 change, and just file the 1040X and pay the extra tax due. It is then easy to convince oneself that there is no resultant actual underpayment of tax, and so the 8938 penalty no longer applies. Rather contrived I know, but since the letter of the law is so unreasonable here, living within the spirit of it seems entirely defensible.

If you do go ahead and redo the 8938, hopefully you used tax software so that generating it isn't a huge manual burden. If the end result is 17 pages of extra pointless paper going to the IRS, at least then you can then mildly congratulate yourself for having thrown just a little extra grit into its gears.
JustLurking I am very grateful for your reply. Your advice is good, thank you.

After 90 or so views, I had given up hope of any reply. I thought perhaps my original post was unclear so I did ask admin to delete it. No response from them.

I will file a 1040X but I do not know whether or not an amended 8938 needs to be submitted as my company pension is the only increase for tax purposes. As a DB pension, I am not sure this is required for the 8938 anyway.
DBP as discussed elsewhere are not required for FBAR but 8938? I have asked the IRS, they just tell me to consult a tax attorney. My previous CPA said they should be entered as custodial accounts but they were a complete disaster.
I cannot find written information on this.
 

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DBP as discussed elsewhere are not required for FBAR but 8938? I have asked the IRS, they just tell me to consult a tax attorney.
The IRS says to report them. If you don't have or don't know the maximum 'value', just put zero. Nonsensical, so very much in line with a lot of the rest of FATCA.

This doesn't of course explain why when you ask the IRS they don't know what is in their own 'Basic(!?) Questions and Answers' documentation. (Which one can see as sort-of encouraging in a way; the whole thing is now so complex that the IRS itself can no longer cope.)

Also, note that IRS FAQs and Q&As are subject to no-notice change and revision, and in fact carry no legal weight and cannot be relied on by taxpayers anyway. The TAS's own Nina Olson recently labelled them a 'Trap for the Unwary'. And yet in this case, the Q&A is all you have to go on.

What an exciting time to be alive, eh?
 

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Discussion Starter · #5 ·
The IRS says to report them. If you don't have or don't know the maximum 'value', just put zero. Nonsensical, so very much in line with a lot of the rest of FATCA.

This doesn't of course explain why when you ask the IRS they don't know what is in their own 'Basic(!?) Questions and Answers' documentation. (Which one can see as sort-of encouraging in a way; the whole thing is now so complex that the IRS itself can no longer cope.)

Also, note that IRS FAQs and Q&As are subject to no-notice change and revision, and in fact carry no legal weight and cannot be relied on by taxpayers anyway. The TAS's own Nina Olson recently labelled them a 'Trap for the Unwary'. And yet in this case, the Q&A is all you have to go on.

What an exciting time to be alive, eh?

Thanks again.
I thought the French tax system would be difficult but it is child's play compared to these guys.
 

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Bev has been uncharacteristically silent on this question. And I don't know, having never had to file any 8938. Sorry. Nevertheless, I'll throw out some pointers, which you can of course ignore entirely, and which may be suspect anyway...
Basically, I'm in the same boat as you are. No experience whatsoever with the 8938, so no real ideas.

I do think you're more or less on the right track, though. Normally, you can get away with a "good faith" attempt - which would be to file the 1040X, own up to the additional tax due plus interest and if they want anything more they'll be in touch. But that approach depends on the rest of your return - and how much "good faith" that reflects.
Cheers,
Bev
 

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I also stayed rather silent, because I have limited experience with the 8938 and 1040X filing and had (as it turns out wrongly) assumed others more conversant with these forms would chip in.

Here is my take.

With a few limited exceptions, when you file a 1040X you are meant to file the updated/corrected form or schedule that reflects that change.

Trying to read between the lines here you have mis-reported some form of passive income related to one or more foreign financial accounts.

So, say for example you forgot to report foreign interest or dividends then you should be re-submit your schedule B along with the 1040X.

The 8938 is an information form not an income form.. The accuracy related penalty, mentioned by JL is really a bonus extra INCOME under-reporting penalty when you fail to report an account that has generated income.

So ultimately it becomes a question of what sort of error was made on the original return.

If you forgot that term deposit, and therefore didn't report the account at all.. then you should report that account on an amended 8938 and the income on Sched B.

If the account was reported on 8938 and it simply the income that was not reported then you could probably simply not amend the 8938. I am assuming here that the original 2015 filing included an 8938.

My personal view on a lot of this is that if it is going to keep you awake at night worrying then file the amended 8938 regardless. A couple additional sheets of paper and slightly higher postage a cheap expense for a good nights sleep.

The other thing to consider is you will likely have paid local income tax on this newly reported foreign income. If you file a passive form 1116 then you are likely to have to amend that too in which case you will also need to amend your 2016 return if you have already filed it.
 

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Discussion Starter · #8 ·
I also stayed rather silent, because I have limited experience with the 8938 and 1040X filing and had (as it turns out wrongly) assumed others more conversant with these forms would chip in.

Here is my take.

With a few limited exceptions, when you file a 1040X you are meant to file the updated/corrected form or schedule that reflects that change.

Trying to read between the lines here you have mis-reported some form of passive income related to one or more foreign financial accounts.

So, say for example you forgot to report foreign interest or dividends then you should be re-submit your schedule B along with the 1040X.

The 8938 is an information form not an income form.. The accuracy related penalty, mentioned by JL is really a bonus extra INCOME under-reporting penalty when you fail to report an account that has generated income.

So ultimately it becomes a question of what sort of error was made on the original return.

If you forgot that term deposit, and therefore didn't report the account at all.. then you should report that account on an amended 8938 and the income on Sched B.

If the account was reported on 8938 and it simply the income that was not reported then you could probably simply not amend the 8938. I am assuming here that the original 2015 filing included an 8938.

My personal view on a lot of this is that if it is going to keep you awake at night worrying then file the amended 8938 regardless. A couple additional sheets of paper and slightly higher postage a cheap expense for a good nights sleep.

The other thing to consider is you will likely have paid local income tax on this newly reported foreign income. If you file a passive form 1116 then you are likely to have to amend that too in which case you will also need to amend your 2016 return if you have already filed it.
Moulard
Thank you for your reply, much to think about. There seems to be a never ending list of forms I am learning about even though I am no longer a US tax person, thank goodness.

My 2015 reporting is a complete mess, I had to file 1040X due to the omission of 8938 (ignorance of my CPA). Then the same again a few days later because of a missing page in mailing.
I have also received about twelve corrected 1095-A's for 2015 (O'care error)

All accounts have been listed from day one.
The under reported amount on just one account was due to a silly error.


All calculations were made initially using monthly exchange rate averages.

Using the IRS whole year average makes a gross income difference of just a couple of hundred dollars.

The easy bit would just to file another 1040X with an adjusted gross income.
I have no tax software so I will need the help of a CPA to calculate the amounts owed.

If I added an 8938, I would need a change nearly every figure entered albeit by just a small amount. Just time and paper.
I have plenty of paper, just running out of time.
 

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Discussion Starter · #9 ·
Sorry out of time for an edit post #8
Bev can you change last para to read?

If I added an 8938, I would need a change very little.Just time and paper.
I have plenty of paper, just running out of time.
 

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The only form that prescribes the exchange rate to use is Form 8938.

If you have accidentally used a monthly average to calculate the max value of accounts rather than the end of year value then personally I don't think its worth amending your return - particularly if you have in fact reported all of the accounts.

For the purposes of conversion of income, deductions etc, you can use whatever rate you like, so long as 1) it is used consistently to convert into USD and 2) it is a published rate. So, if you are amending your return because you think you have used the "wrong" exchange rate to convert your income, it isn't necessary.

For what its worth, over the years I have used the annual average rate, a monthly average and the daily spot rate. I have used IRS, US Treasury and Reserve Bank of Australia published rates.

The other thing... don't panic... you actually have plenty of time to draw your breath and sleep on it.

Your 2015 tax return was due on either the 15 April, or 15 June 2016 - depending on whether you were filing from within or without the US. Assuming that return was filed on time, you have 3 years from then to file an amended return.
 

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Discussion Starter · #11 ·
The only form that prescribes the exchange rate to use is Form 8938.

If you have accidentally used a monthly average to calculate the max value of accounts rather than the end of year value then personally I don't think its worth amending your return - particularly if you have in fact reported all of the accounts.

For the purposes of conversion of income, deductions etc, you can use whatever rate you like, so long as 1) it is used consistently to convert into USD and 2) it is a published rate. So, if you are amending your return because you think you have used the "wrong" exchange rate to convert your income, it isn't necessary.

For what its worth, over the years I have used the annual average rate, a monthly average and the daily spot rate. I have used IRS, US Treasury and Reserve Bank of Australia published rates.

The other thing... don't panic... you actually have plenty of time to draw your breath and sleep on it.

Your 2015 tax return was due on either the 15 April, or 15 June 2016 - depending on whether you were filing from within or without the US. Assuming that return was filed on time, you have 3 years from then to file an amended return.
Moulard, thanks again.

The monthly rate I initially used was from a respected source. However the IRS whole year average was more advantageous.

I am amending my account because I made a silly error in my addition of one monthly pay check. Sounds crazy and incompetent. It was.

The rate of exchange bit just reduces the whole gross in USD. No other reason.

The original 8938 did use the US Treasury rate.
 

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From what you say there should be no need to file an amended 8938. You have reported all of the accounts, and by the sound of it used the correct 31 Dec Treasury rate.

Don't beat yourself up too much of the salary errors. I have done similar.

Depending on how you file, all you should need to is file the 1040X supported either by:

Form 2555 (if you take the foreign earned income exclusion)

Form 1116 general (if you only take a foreign tax credit)

Both forms, if you exclude your wages but they are above the 2015 earned income exclusion of USD $100,800)

Remember when you file an amended return you only need to file the 1040X (if the numbers change), the amended (or missing) forms.
 

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Discussion Starter · #13 ·
From what you say there should be no need to file an amended 8938. You have reported all of the accounts, and by the sound of it used the correct 31 Dec Treasury rate.

Don't beat yourself up too much of the salary errors. I have done similar.

Depending on how you file, all you should need to is file the 1040X supported either by:

Form 2555 (if you take the foreign earned income exclusion)

Form 1116 general (if you only take a foreign tax credit)

Both forms, if you exclude your wages but they are above the 2015 earned income exclusion of USD $100,800)

Remember when you file an amended return you only need to file the 1040X (if the numbers change), the amended (or missing) forms.
Moulard

Thank you.
 
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