What Form 8938 Is For
Form 8938 must be filed with your annual income tax return if you hold certain foreign financial assets. These include foreign bank accounts, brokerage accounts, foreign mutual funds, private equity funds, and other foreign partnerships or financial institutions. The IRS requires this form to identify and verify foreign financial accounts held abroad, ensuring proper reporting of foreign income and foreign economic interests.
When You’d Use Form 8938
U.S. taxpayers must file Form 8938 if the aggregate value of their specified foreign financial assets exceeds the reporting thresholds for their filing status. Married filing jointly or separately, resident aliens, and certain nonresident aliens may need to include it with their annual tax return. Late or amended filing applies when you discover missing or inaccurate foreign asset reporting after the initial submission.
Key Rules or Details for 2024
- Who Must File: U.S. citizens, resident aliens, and specified domestic entities must report foreign financial assets required under the Foreign Account Tax Compliance Act when their total value exceeds applicable thresholds.
- Reporting Thresholds: Reporting thresholds vary depending on the filing status. Married filing jointly within the U.S. must report foreign assets exceeding $100,000 on the last day of the tax year or $150,000 at any point.
- Specified Domestic Entity: Certain domestic entities and corporations must file Form 8938 when their foreign financial interests and foreign financial accounts exceed the applicable reporting threshold.
- Types of Assets Reportable: Assets include foreign bank accounts, foreign partnerships, foreign trusts, foreign hedge funds, and retirement accounts that qualify as specified foreign financial assets.
- Exceptions: Foreign real estate directly owned is not reportable; however, ownership through a foreign entity must be included as a foreign financial asset.
- Foreign Branch Rule: Bank accounts or financial accounts maintained by a foreign branch of a U.S. financial institution do not generally require reporting under this form.
- Relation to FBAR: Form 8938 differs from FinCEN Form 114 (FBAR). While both involve foreign accounts, Form 8938 focuses on broader categories of foreign financial assets and is attached to your federal tax return.
Browse more tax form instructions and filing guides in our Forms Hub.
Step-by-Step (High Level)
Step 1: Determine if you must file
Review your foreign financial accounts held outside your country. If their aggregate value exceeds the applicable reporting threshold based on your filing status, you must file Form 8938 with your income tax return.
Step 2: Gather documentation
Collect statements from foreign financial institutions, foreign corporations, and other foreign entities that hold your financial accounts. Include documents showing the maximum value for each specified foreign financial asset during the tax year.
Step 3: Determine asset values
Identify the maximum value and total value of your foreign assets using year-end statements. For foreign stocks or foreign partnerships, use publicly available market data or verifiable financial records from each relevant financial institution.
Step 4: Complete the form
List each specified foreign financial asset, its maximum value, and related foreign institution information. Attach the completed form to your annual tax return or amended filing form if correcting errors.
Step 5: Attach and submit
File Form 8938 electronically with your joint income tax return or paper submission. Ensure each foreign financial asset and foreign account meets the required disclosure standards for IRS compliance.
Learn more about federal tax filing through our IRS Form Help Center.
Common Mistakes and How to Avoid Them
- Confusing Form 8938 with FBA: Taxpayers sometimes assume these forms are identical. To avoid error, review both reporting requirements to ensure each foreign asset is properly reported.
- Ignoring dormant foreign accounts: Even if a foreign account produces no income, it must be included. Prevent mistakes by confirming that all financial accounts held abroad are listed.
- Missing Foreign Retirement Plans: U.S. taxpayers often overlook foreign pension or deferred compensation plans. Avoid this by verifying that each plan is categorized as a specified foreign financial asset.
- Reporting assets held in U.S. accounts: Do not list foreign securities in domestic institutions. Verify whether foreign banks or entities truly hold assets. Ensure that you report both the maximum and end-of-year values using the correct valuation dates. Review foreign bank account balances throughout the year for accuracy.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
The IRS reviews Form 8938 alongside your federal tax return to verify reported foreign assets and assess tax liability. If discrepancies arise between your filing and information from foreign financial institutions, the IRS may request clarification. Maintaining proper records of your foreign financial assets and financial accounts for at least six years helps demonstrate compliance and reduces the potential for criminal penalties resulting from underreporting.
FAQs
What foreign financial assets must be reported on Form 8938 2024?
You must report specified foreign financial assets, such as foreign bank accounts, brokerage accounts, and foreign mutual funds, when their aggregate value exceeds IRS thresholds.
How do foreign financial institutions affect my filing status?
Foreign financial institutions provide account statements used to calculate the total value and determine whether your residency and filing status trigger the reporting threshold requirement.
What foreign assets count toward the aggregate value threshold?
Foreign assets, including foreign stocks, foreign partnerships, and certain foreign financial accounts held abroad, all contribute to your total aggregate value for Form 8938 reporting.
How should domestic entities report specified foreign financial assets required by law?
Domestic entities must disclose all specified foreign financial assets exceeding the applicable threshold, listing the maximum value and institution details on their income tax return.
What are the reporting requirements for foreign bank accounts?
Bank accounts maintained by foreign financial institutions are reportable if the total value exceeds the applicable reporting threshold. Always verify each foreign account’s reporting obligation.
Can foreign real estate or foreign entities be excluded from the Form 8938 filing form?
Directly owned foreign real estate is excluded; however, ownership through a foreign corporation or partnership is considered a reportable foreign financial asset.
How do specified individuals ensure compliance with IRS Form 8938 foreign asset reporting?
Specified individuals should review all financial accounts held abroad, confirm reporting thresholds, and maintain accurate documentation of foreign financial assets for their annual tax year filings.
