What Form 8938 (2011) Is For
Form 8938, officially titled the Statement of Specified Foreign Financial Assets, was introduced by the IRS under the Foreign Account Tax Compliance Act (FATCA) for the 2011 tax year. This form requires U.S. taxpayers to report specified foreign financial assets when their total value exceeds certain reporting thresholds.
The purpose of the form is to enhance financial transparency and assist the IRS in identifying unreported foreign financial accounts and other foreign assets. It applies to specified persons, including U.S. citizens, resident aliens, and certain nonresident aliens who hold qualifying foreign assets that meet or exceed the applicable reporting threshold.
Taxpayers must file Form 8938 with their annual income tax return. Although the form does not directly determine tax liability, it provides the IRS with essential information to monitor compliance with U.S. tax laws related to foreign assets.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive guide for Form 8938: Statement of Specified Foreign Financial Assets (2011).
When You’d Use Form 8938
Form 8938 is required when a taxpayer’s specified foreign financial assets exceed the applicable reporting threshold for the 2011 tax year. It must be filed with the annual income tax return, whether it is filed timely, late, or amended, to ensure full disclosure of foreign financial accounts and assets. Taxpayers who later discover unreported foreign assets must file an amended return with Form 8938 to maintain compliance with IRS foreign asset reporting requirements.
Key Rules or Details for 2011
For the 2011 tax year, Form 8938 applied to specified persons, including U.S. citizens, resident aliens, and certain nonresident aliens with specified foreign financial assets exceeding IRS reporting thresholds. These thresholds varied by filing status and whether the taxpayer lived in the United States or abroad.
Reportable assets included financial accounts maintained by foreign financial institutions, foreign stocks, partnership interests, and other foreign financial assets held for investment. Direct ownership of foreign real estate was excluded, but property owned through a foreign entity was reportable under FATCA requirements.
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 must file
Confirm that you are a specified person and that the total value of your specified foreign financial assets exceeds the IRS reporting threshold for your filing status and residence.
Step 2: Gather supporting documentation
Collect account statements, valuation records, and reports from all foreign financial institutions to establish both the year-end and maximum value of each asset.
Step 3: Convert foreign currency
Convert all foreign asset values to U.S. dollars using the U.S. Treasury’s official exchange rate as of December 31, 2011.
Step 4: Complete Form 8938
Provide details for each specified foreign financial asset, including type, identifying information, maximum value during the year, and whether related income was reported on the income tax return.
Step 5: Check for duplicate reporting
If assets were already reported on Forms 3520, 5471, 8621, 8865, or 8891, do not list them again on Form 8938. However, include their value when calculating total assets for threshold purposes.
Step 6: Attach to your tax return
Attach Form 8938 to your annual income tax return, such as Form 1040 or 1040-NR. The form cannot be filed separately.
Common Mistakes and How to Avoid Them
- Confusing Form 8938 with FBAR (FinCEN Form 114): File both forms when required—each has separate thresholds, filing rules, and agencies; Form 8938 goes to the IRS, while FBAR is filed with FinCEN.
- Misunderstanding what qualifies as a foreign account: Only accounts held with foreign financial institutions are reportable; accounts with U.S. banks or brokers are not.
- Failing to include jointly owned or indirect assets: Report all jointly held accounts and those owned through foreign corporations, partnerships, or trusts.
- Incorrectly calculating asset values: Determine the maximum or aggregate value of all foreign financial assets using accurate exchange rates for the tax year.
- Assuming errors excuse penalties: Honest mistakes do not automatically remove liability; demonstrate reasonable cause and file corrected forms promptly to reduce penalties.
Careful attention to definitions, valuation rules, and filing requirements helps ensure full compliance with both IRS and FinCEN foreign reporting obligations.
What Happens After You File
After filing Form 8938, the IRS reviews the reported foreign financial assets to verify compliance with U.S. tax laws. The information is cross-checked against data from foreign financial institutions and other filings, such as FBAR, to ensure accuracy and transparency.
If Form 8938 is incomplete or missing, the IRS may extend the audit period and assess penalties. Taxpayers should keep records showing the total value and maximum value of all foreign financial accounts held during the tax year to avoid disputes or compliance issues.
FAQs
Who must file Form 8938 for the 2011 tax year?
A taxpayer must file Form 8938 if they are a specified person with foreign financial assets exceeding the applicable reporting threshold. This includes individuals with foreign accounts, foreign bank holdings, or interests in foreign entities reported with their income tax return.
What types of foreign financial assets are required to be reported?
Specified foreign financial assets include foreign bank accounts, brokerage accounts, foreign stocks, foreign partnership interests, and foreign mutual funds. These assets held with foreign financial institutions must be disclosed on the 8938 statement of specified foreign financial assets filed with a federal tax return.
Are foreign real estate or other foreign financial assets included on Form 8938?
Foreign real estate owned directly is not reportable. However, ownership through a foreign corporation, partnership, or trust is considered a specified foreign financial asset. Certain other foreign financial assets held with foreign financial institutions must also be reported.
How does filing status affect reporting thresholds for Form 8938?
The reporting threshold depends on filing status and residence. Taxpayers who are married and filing jointly have higher limits than those who are married and filing separately or single. The aggregate value of all foreign financial accounts held must exceed the applicable reporting threshold for the tax year.
What happens if a taxpayer fails to file Form 8938?
Failing to file Form 8938 can result in a $10,000 penalty, with additional fines for continued non-compliance. Criminal penalties may apply for willful non-disclosure of specified foreign financial assets. Filing promptly ensures compliance with U.S. tax laws and financial transparency requirements.
Do domestic entities have to report specified foreign assets?
Certain domestic entities, including domestic corporations, partnerships, and trusts, must file Form 8938 if they own specified foreign assets exceeding the reporting threshold. These domestic entities must disclose any foreign financial accounts or foreign investments to comply with IRS reporting requirements.
How should taxpayers determine the maximum value of foreign assets?
Taxpayers should use year-end statements and other records from foreign financial institutions to determine the maximum value of their foreign financial accounts. Converting foreign currency to U.S. dollars helps ensure accurate reporting of foreign assets for the applicable tax year.
For more resources on filing or understanding other IRS forms, visit our Form Summaries and Guides Library.
