What Form 8938 (2010) Is For
IRS Form 8938 (2010), titled Statement of Specified Foreign Financial Assets, was created under the Foreign Account Tax Compliance Act (FATCA) to ensure that U.S. taxpayers report foreign financial accounts and other foreign financial assets held outside the country. The form helps the IRS detect unreported foreign income, reduce tax evasion, and improve compliance with international reporting standards.
A taxpayer must file Form 8938 if they are a U.S. person who holds specified foreign financial assets with an aggregate value exceeding certain thresholds. The form applies to financial accounts maintained by foreign financial institutions, foreign bank accounts, brokerage accounts, investment accounts, and interests in foreign corporations or partnerships. It is filed with the taxpayer’s annual income tax return, not separately.
Both individuals and certain domestic entities may be required to report these assets. Entities such as specified domestic corporations or partnerships must file if they hold assets through foreign accounts or have ownership interests in foreign financial institutions.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive Form 8938: Statement of Specified Foreign Financial Assets (2010) – A Comprehensive Guide.
When You’d Use Form 8938
Form 8938 must be filed for any tax year in which the total value of specified foreign assets exceeds the reporting threshold—$50,000 on the last day of the year or $75,000 at any time during the year for single filers, and double those amounts for married filing jointly. The requirement applies to taxpayers who hold foreign bank or brokerage accounts, own interests in foreign corporations or partnerships, or maintain foreign retirement or investment accounts.
If a taxpayer fails to file Form 8938 for a prior year, they must correct the error by submitting an amended return with Form 1040X and the missing Form 8938. Those unaware of their filing obligations may qualify for the IRS streamlined filing compliance procedures or the delinquent FBAR submission program to resolve noncompliance with reduced penalties.
Key Rules or Details for 2010
The year 2010 introduced FATCA, establishing the foundation for foreign asset reporting and leading to the creation of Form 8938. Although enacted in March 2010, Form 8938 reporting began with the 2011 tax year. Specified individuals or domestic entities must report foreign financial interests such as offshore accounts, partnerships, and investments, while excluding U.S. mutual funds, domestic entities without foreign ownership, and directly owned foreign real estate unlike FBAR, which reports only foreign financial accounts over $10,000 through FinCEN, Form 8938 covers a broader range of assets and is filed with the taxpayer’s income tax return.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Tax Forms.
Step-by-Step (High Level)
Step 1: Determine if You Are Required to File
The requirement applies to any U.S. person who owns or has signature authority over foreign financial accounts or other specified foreign assets that exceed the reporting threshold.
Step 2: Identify All Foreign Financial Assets
Include foreign bank accounts, brokerage accounts, offshore accounts, retirement accounts, and foreign investment accounts. Exclude accounts maintained by U.S. institutions, even if they hold foreign securities.
Step 3: Calculate the Maximum Value of Each Account
Determine the highest value of each account during the calendar year and convert the amount to U.S. dollars using the Treasury’s year-end exchange rate.
Step 4: Compare Totals to Reporting Thresholds
Add together the maximum values of all foreign financial assets. If the aggregate value exceeds the reporting threshold for the filing status, Form 8938 must be filed.
Step 5: Complete and Attach Form 8938
The form is attached to the taxpayer’s annual income tax return and filed in accordance with standard IRS submission procedures. Taxpayers who already report assets on other forms, such as Form 5471 or 8865, must still disclose them on Form 8938, but can cross-reference where they are reported.
Step 6: File Any Related FBAR Forms
If the taxpayer holds foreign accounts with an aggregate value of $10,000 or more, they must also file FinCEN Form 114 (FBAR) electronically through the BSA e-filing account.
Common Mistakes and How to Avoid Them
- Confusing Form 8938 with the FBAR: File both forms when required—Form 8938 reports specified foreign financial assets, while the FBAR reports foreign bank and financial accounts.
- Reporting year-end values instead of maximum balances: Always report the highest account value during the tax year, not just the year-end balance.
- Omitting jointly owned or indirect accounts: Include joint accounts and those held through foreign entities or trusts to ensure full compliance.
- Reporting non-reportable assets: Do not list directly owned foreign real estate unless it’s held through a foreign entity that must be reported.
- Forgetting foreign pension or retirement accounts: Include all applicable foreign retirement or pension plans when required under IRS rules.
Maintain complete bank statements, transaction records, and exchange rate documentation to support your filings and prevent IRS penalties or extended review.
What Happens After You File
After you file Form 8938, the IRS reviews the reported foreign financial assets to ensure full compliance with U.S. reporting requirements. If the information aligns with other filings, such as the FBAR, processing continues without issue. Any discrepancies, omissions, or unreported income may trigger an IRS notice, audit, or penalty assessment. Maintaining accurate records supports a smooth review and helps verify reported amounts if requested.
FAQs
What is IRS Form 8938 (2010) used for?
IRS Form 8938 (2010) is used by U.S. persons to report specified foreign financial assets, including foreign bank accounts, brokerage accounts, and investment accounts, when the aggregate value exceeds the reporting threshold for the tax year.
Who must report foreign financial accounts and assets?
Any U.S. person, including specified domestic entities and individuals, must report foreign financial accounts and foreign financial assets held with foreign financial institutions when the total value exceeds the required reporting threshold for that tax year.
How does Form 8938 differ from FinCEN Form 114 (FBAR)?
Form 8938 is filed with an income tax return to the IRS and covers a broad range of specified foreign assets. FinCEN Form 114, or FBAR, is filed through the Financial Crimes Enforcement Network and reports only foreign financial accounts.
Are jointly owned foreign accounts and retirement accounts required to be reported?
Yes, jointly owned accounts, foreign retirement accounts, and other specified foreign financial assets are reportable on Form 8938 when their maximum value or aggregate value exceeds the required threshold for the reporting calendar year.
What if a taxpayer forgets to report foreign accounts or assets?
Taxpayers who fail to report foreign accounts or assets must file an amended tax return using Form 8938 and follow the delinquent FBAR submission procedures if applicable. Noncompliance may lead to penalties or extended review periods.
What are the penalties for failing to file Form 8938?
Failure to file Form 8938 when required can result in a $10,000 penalty, increasing by $10,000 every 30 days, up to a maximum of $50,000. Willful noncompliance, tax evasion, or false reporting may trigger additional criminal penalties.
How should foreign bank and financial accounts be valued?
Taxpayers must determine the maximum value of each foreign bank and financial account during the calendar year. Convert foreign currency amounts to U.S. dollars using the Treasury’s year-end exchange rate before filing Form 8938.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
