How do I report foreign stock sales to the IRS?
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The filing of Form 8938 does not relieve you of the separate requirement to file the FBAR if you are otherwise required to do so, and vice-versa. Depending on your situation, you may be required to file Form 8938 or the FBAR or both forms, and certain foreign accounts may be required to be reported on both forms.
Use Form 8938 to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.
U.S. citizens, U.S. residents, certain residents of U.S. Possessions and nonresidents who elect to be treated as U.S. residents will have to fill out this form if they hold financial accounts or certain assets held for investment (deemed “specified persons”).
When Americans buy stocks or bonds from a company based overseas, any investment income (interest, dividends) and capital gains are subject to U.S. income tax. Here's the kicker: The government of the firm's home country may also take a slice. If double taxation sounds draconian, take heart.
The FBAR is not a tax form and it is not filed with the Internal Revenue Service; it is lodged electronically on the FinCEN website. Conversely, FATCA reporting is made directly to the Internal Revenue Service and it is submitted by US taxpayers on an annual Form 8938.
Generally, FBAR reporting (FinCEN Form 114) applies to each “United States person” (U.S. person) who has a financial interest in, or signature or other authority over, foreign financial accounts (which includes foreign securities accounts) that have an aggregate value exceeding $10,000 at any time during the calendar ...
The penalties include: Failure-to-File Penalty: A penalty of $10,000 for each year you fail to file Form 8938. This penalty can go up to $50,000 for continued non-compliance after the IRS sends you a notice of failure to file.
Incorrect Form 8938 Reporting & EOI
If a taxpayer files a Form 8938 or fails to do so — and/or fails to report income associated with an account that was reported by the Foreign Financial Institution in accordance with FACTA — it could lead to an audit.
If you're required to file an FBAR (Foreign Bank and Financial Accounts Report) and fail to do so in a timely and accurate manner, you may face significant consequences, including civil monetary penalties, criminal penalties, or both.
Do I need to file FBAR if less than $10,000?
Who Must File the FBAR? A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
Failure to report foreign financial assets on Form 8938 may result in a penalty of $10,000 (and a penalty up to $50,000 for continued failure after IRS notification).
Like FBAR, Form 8938 carries a $10,000 penalty for not filing. If the IRS sends you notice of your failure to file, you have 90 days to comply or be subject to an additional $10,000 per month, up to $50,000, until you do file. There is a 40 percent penalty for any tax underpaid on foreign financial assets not reported.
For the tax year 2022 (the tax return filed in 2023), you may be eligible to exclude up to $112,000 of your foreign-earned income from your U.S. income taxes. For the tax year 2023 (the tax return filed in 2024), this amount increases to $120,000.
Generally, a 1099 is not required to be issued for international vendors who are foreign vendors. Individuals living outside the United States who qualify to file an IRS Form W-8BEN as foreign persons/foreign contractors and don't perform services in the United States, don't get a Form 1099-NEC.
You must report all 1099-B transactions on Schedule D (Form 1040), Capital Gains and Losses and you may need to use Form 8949, Sales and Other Dispositions of Capital Assets. This is true even if there's no net capital gain subject to tax.
By and large, there is no requirement for the hiring company to issue an IRS Form 1099 to an international contractor, which would be the case if the contractor were based in the U.S.
Form W-8BEN is used by foreign vendors who are individuals to confirm that they are not U.S. taxpayers. The vendor must provide form W-8BEN even if the vendor is not claiming a tax treaty reduction or exemption from withholding.
The W-8BEN is an Internal Revenue Service (IRS) mandated form to collect correct Nonresident Alien (NRA) taxpayer information for individuals for reporting purposes and to document their status for tax reporting purposes.
Form 1099-MISC is for reporting payments like rent or prizes that are not subject to self-employment tax, while Form 1099-NEC is for reporting nonemployee compensation that is most likely subject to self-employment tax.
What counts as foreign stock?
A foreign stock is the equity of a company that is headquartered outside of the United States. A foreign company can either trade on an international stock exchange, or it can issue shares in the United States either via a traditional initial public offering (IPO) or an American Depository Receipt (ADR) program.
