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California Filers Subject to $10,000 Penalty for Failure to File Form 8938

This article is reproduced with permission from Spidell Publishing, Inc.

In 2015, California enacted legislation that conformed to the federal foreign account disclosure (FATCA) requirements. This means that individuals and businesses that have specified foreign financial assets must file Form 8938, Statement of Specified Foreign Financial Assets, with the California return. The confusion arises when:

  • the taxpayer is a California nonresident;
  • the taxpayer is a nonresident alien; and
  • whether attaching the federal return will meet the requirement.

California nonresident
Any individual or any business entity required to file a Form 8938 with the IRS who files a California return must comply with the FATCA requirement. So, if a nonresident has a filing requirement and meets the FATCA reporting criteria of Internal Revenue Code (IRC) Section 6038D and California Revenue & Taxation Code (R&TC) Section 19141.5, the taxpayer must attach a Form 8938 to the California nonresident return.

Nonresident alien
For federal purposes, some nonresident aliens are not required to report foreign assets. However, California law does not conform to the federal nonresident alien provision, including the FATCA filing requirements, so a nonresident alien with California-source income must complete and file Form 8938 with the California return.

Meeting the filing requirement
For individuals, in most cases, the FTB requires a copy of the federal tax return to be attached to the California return. The requirement will be met if the Form 8938 is attached to the federal return. If not, you must complete and attach a copy of Form 8938. For business returns, attach a copy of the Form 8938 if the entire federal return was not attached. The Form 8938 may be included as part of an e-filed return. If a paper return is filed, the Form 8938 must be attached to the return.

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