What the Form Is For

Form 8938, Statement of Specified Foreign Financial Assets, is an IRS tax form that requires certain U.S. taxpayers to report their foreign financial holdings. Introduced under the Foreign Account Tax Compliance Act (FATCA), this form helps the IRS track assets held outside the United States to ensure proper tax compliance.

If you're a U.S. citizen, resident alien, or certain nonresident aliens with significant foreign financial assets, Form 8938 serves as your disclosure statement. The form captures information about foreign bank accounts, investment accounts, foreign stocks and securities, interests in foreign businesses, foreign pension plans, and various financial instruments with foreign counterparties.

It's important to understand that Form 8938 is different from the FBAR (FinCEN Form 114). While both forms deal with foreign assets, they have different thresholds, due dates, and reporting requirements. Many taxpayers must file both forms, and filing one does not eliminate the obligation to file the other.

The form must be attached to your annual income tax return—you cannot file it separately. This means if you're not required to file a tax return, you don't need to file Form 8938, regardless of your foreign asset values.

When You'd Use (Late/Amended)

Regular Filing: Form 8938 must be filed with your regular income tax return by the due date, including extensions. For 2013 tax returns, this typically meant April 15, 2014, or October 15, 2014, if you filed for an extension.

Late Filing: If you missed the deadline, you should attach Form 8938 to your tax return as soon as possible, even if filing late. The IRS may impose penalties for late filing, but acting promptly can demonstrate good faith and potentially reduce penalties. Remember: you cannot send Form 8938 separately to the IRS—it must always be attached to an income tax return.

Amended Returns: If you discover that you failed to file Form 8938 with your original 2013 return, or if you filed an incomplete or incorrect form, you must file an amended tax return (Form 1040X) with the corrected or newly completed Form 8938 attached. Common reasons for filing amended returns include:

• Discovering you had reportable assets you didn't initially disclose
• Finding errors in asset valuations
• Realizing you met the reporting threshold when you thought you didn't
• Correcting information about foreign accounts or investments

The sooner you file an amended return with Form 8938, the better. Voluntary disclosure typically results in more favorable treatment than being discovered through an IRS audit.

Key Rules for 2013

Reporting Thresholds

Whether you need to file Form 8938 depends on where you live and your filing status. For the 2013 tax year:

Living in the United States:

• Unmarried or married filing separately: File if your total specified foreign financial assets exceeded $50,000 on the last day of the tax year OR more than $75,000 at any time during the year.
• Married filing jointly: File if assets exceeded $100,000 on the last day OR more than $150,000 at any time during the year.

Living abroad (meeting certain foreign residence tests):

• Unmarried or married filing separately: File if assets exceeded $200,000 on the last day OR more than $300,000 at any time during the year.
• Married filing jointly: File if assets exceeded $400,000 on the last day OR more than $600,000 at any time during the year.

What Assets to Report

Specified foreign financial assets include:

• Financial accounts at foreign financial institutions (banks, investment firms, foreign mutual funds, foreign hedge funds)
• Foreign stock or securities not held in a financial account
• Any interest in a foreign partnership, corporation, or other entity
• Any financial instrument or contract with a foreign issuer or counterparty (including notes, bonds, swaps, options, and other derivatives)
• Interests in foreign trusts and foreign estates (if you know about them)
• Foreign pension plans and foreign deferred compensation plans

Important Exceptions

You don't need to report:

• Accounts held at U.S. financial institutions (even if they contain foreign investments)
• U.S. retirement accounts (401(k), IRAs, etc.)
• Assets already fully reported on other forms (Forms 3520, 3520-A, 5471, 8621, 8865, or 8891)—though you must still identify these forms on Part IV of Form 8938

Step-by-Step (High Level)

Step 1: Determine If You're a "Specified Individual"

Confirm your status as a U.S. citizen, resident alien, or qualifying nonresident alien. Determine whether you lived in the U.S. or abroad during 2013.

Step 2: Calculate Your Total Asset Values

Add up the maximum values of all your specified foreign financial assets during 2013. Use fair market value for most assets. For bank accounts, you can rely on periodic statements. Compare this total to your applicable threshold to see if filing is required.

Step 3: Handle Joint Ownership Carefully

If you jointly own assets with your spouse and file jointly, count the full value once. If married filing separately, count half the value of jointly-owned assets. If jointly owning with someone other than your spouse, count the full value.

Step 4: Convert Foreign Currency

Convert all foreign currency values to U.S. dollars using the Treasury Department's exchange rate on the last day of the tax year (December 31, 2013). This rate must be used consistently throughout the form.

Step 5: Gather Required Information

For each reportable asset, collect:

• Description and type of asset
• Identifying number (account number, if applicable)
• Name and address of foreign institution or issuer
• Maximum value during the year
• Dates of acquisition or disposition (if applicable)
• Income, gains, or losses generated

Step 6: Complete the Form

• Part I: Summarize foreign deposit and custodial accounts
• Part II: Summarize other foreign assets
• Part III: Report tax items (interest, dividends, gains, etc.) from these assets
• Part IV: Identify any assets reported on other IRS forms
• Part V: Provide detailed information for each account
• Part VI: Provide detailed information for each other asset

Step 7: Attach and File

Attach the completed Form 8938 to your Form 1040 or 1040NR and file by the due date, including extensions.

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 8938 Separately

Form 8938 must be attached to your income tax return—never send it separately to the IRS. Always include it with Form 1040 or 1040NR.

Mistake #2: Forgetting to Count All Assets

Many taxpayers forget that they must count assets reported on other forms (like Form 5471 or 8621) when determining if they meet the threshold. While you may not need to report details of these assets again on Form 8938, you must include their values to see if filing is required.

Mistake #3: Incorrect Currency Conversion

Always use the exchange rate from December 31, 2013 (the last day of the tax year), not the rate on the date you acquired or sold an asset, and not an average rate. The U.S. Treasury's Financial Management Service provides official rates.

Mistake #4: Wrong Threshold for Your Situation

Double-check whether you qualify as "living abroad" under IRS rules. Simply traveling frequently doesn't count—you must meet specific presence tests. Using the wrong threshold could mean filing when unnecessary or, worse, not filing when required.

Mistake #5: Assuming No Income Means No Reporting

You must report specified foreign financial assets even if they produced no income, gains, or losses during the year. The reporting requirement is based on asset value and ownership, not whether the assets generated taxable income.

Mistake #6: Miscalculating Joint Ownership Values

The rules for joint ownership are specific: married couples filing jointly count jointly-owned assets once at full value; married filing separately count half the value; joint ownership with non-spouses requires reporting the full value.

Mistake #7: Ignoring U.S. Possession Accounts

Financial institutions located in U.S. territories (Puerto Rico, Guam, U.S. Virgin Islands, etc.) may need to be reported if they meet the definition of foreign financial institutions under the rules.

What Happens After You File

IRS Processing: Once you file Form 8938 with your tax return, the IRS enters the information into their systems. They use this data to cross-reference with other information they receive from foreign financial institutions (which also report under FATCA), other tax forms you've filed, and third-party data sources.

Extended Statute of Limitations: Filing Form 8938 affects how long the IRS can audit your return. If you fail to file Form 8938 or fail to report a specified asset, the IRS has an extended period—potentially indefinitely—to audit your return until you properly file. If you omit more than $5,000 of income related to foreign assets, the IRS has six years (instead of the normal three) to assess additional taxes.

Compliance Verification: The IRS may send you a notice if they identify discrepancies between your Form 8938 and other information they have. They might also request additional documentation about specific assets or ask you to clarify valuations.

No Immediate Confirmation: Unlike some forms, you typically won't receive specific acknowledgment that your Form 8938 was accepted. If there are no issues, you'll simply hear nothing beyond normal tax return processing.

Penalty Assessments: If the IRS determines you should have filed Form 8938 but didn't, they will first send you a notice asking for the form. You'll have 90 days to comply before additional penalties begin accumulating beyond the initial $10,000 penalty.

FAQs

Q1: What's the difference between Form 8938 and the FBAR?

Both forms report foreign financial assets, but they're separate requirements. Form 8938 has higher thresholds (starting at $50,000), reports more types of assets (including foreign stocks and business interests), and is filed with your tax return. FBAR has a lower threshold ($10,000), focuses on foreign bank and financial accounts, and is filed separately with FinCEN by April 15. Many taxpayers must file both.

Q2: What penalties will I face if I don't file Form 8938?

The initial penalty is $10,000 for failure to file or for filing an incomplete form. If you don't file within 90 days after the IRS notifies you, you'll face an additional $10,000 penalty for every 30 days (or part thereof) you continue not to file, up to a maximum additional penalty of $50,000. If you underreport tax due to an undisclosed asset, there's a 40% penalty on the understatement. Criminal penalties may also apply in serious cases.

Q3: Can I avoid penalties if I have a good reason for not filing?

Yes, penalties may be waived if you can show "reasonable cause" for your failure to file and prove it wasn't due to "willful neglect." However, the IRS evaluates reasonable cause on a case-by-case basis. Note that foreign laws prohibiting disclosure don't constitute reasonable cause.

Q4: Do I report my foreign rental property on Form 8938?

No, foreign real estate held directly is not a specified foreign financial asset. However, if you own the property through a foreign entity (like a foreign corporation or partnership), you must report your interest in that entity. Any rental income from foreign property must still be reported on your regular tax return.

Q5: What if my foreign bank won't give me the information I need?

You're still required to file Form 8938 with the best information available. Use reasonable estimates when exact values aren't available, and explain the estimation method. The IRS is less concerned with minor valuation errors than with complete failure to report assets.

Q6: I'm a dual citizen living in the United States. Do I need to file?

Yes, if you're a U.S. citizen (even with dual citizenship) and meet the reporting thresholds, you must file Form 8938. Your other citizenship doesn't exempt you from U.S. tax reporting requirements.

Q7: What happens if I inherited a foreign account during 2013?

You must report the inherited account if your total specified foreign financial assets (including the inherited account) exceed your applicable threshold. Report the maximum value the account reached at any point while you owned it during the year, even if you inherited it late in the year. Use the date you acquired the account as the acquisition date.

Sources

• IRS Instructions for Form 8938 (2013)
• IRS Form 8938 Information Page
• Comparison of Form 8938 and FBAR Requirements

Word Count: Approximately 1,850 words

This comprehensive guide provides essential information about Form 8938 for the 2013 tax year based on official IRS sources. While this summary offers general guidance, complex situations may require consultation with a tax professional or enrolled agent familiar with international tax compliance.