What Form 8938 Is For

Form 8938 is the IRS form that certain U.S. taxpayers must use to report their foreign financial assets. Think of it as a detailed inventory of your overseas investments and accounts. The form was created as part of the Foreign Account Tax Compliance Act (FATCA) to help the IRS track income from foreign assets that might otherwise go unreported.

What needs to be reported? Form 8938 requires you to disclose two main categories of foreign assets:

• Financial accounts at foreign institutions – This includes savings accounts, checking accounts, brokerage accounts, and any other accounts maintained by banks or financial institutions located outside the United States.
• Other foreign financial assets held for investment (if not in a financial account) – This includes foreign stocks or securities, interests in foreign partnerships, foreign-issued bonds, interests in foreign trusts or estates, foreign pension plans, and financial contracts or derivatives with foreign counterparties.

It's important to understand what you don't need to report: foreign currency held directly (not in an account), foreign real estate owned directly, precious metals, art, jewelry, or other collectibles. However, if you hold real estate through a foreign corporation or trust, you must report your interest in that entity. IRS.gov

When You’d Use Form 8938 (Including Late/Amended)

Regular filing

Form 8938 is attached to your annual income tax return (Form 1040 or 1040NR) and is due by the same deadline, including extensions. For the 2015 tax year, this meant the form was originally due on April 15, 2016 (or October 15, 2016, with an extension).

Late filing

If you failed to file Form 8938 with your original return, you need to file an amended return using Form 1040X (Amended U.S. Individual Income Tax Return) with Form 8938 attached. The sooner you correct this omission, the better, as penalties increase with continued non-compliance. IRS.gov

Important note

You cannot simply mail Form 8938 to the IRS by itself. It must always be attached to either your original tax return or an amended return. If you discover you should have filed Form 8938 after submitting your tax return, filing an amended return is your only option to come into compliance. IRS.gov

Key Rules or Details for 2015

Who must file?

You must file Form 8938 if you're a "specified individual" – which includes U.S. citizens, resident aliens, and certain nonresident aliens who elect to file jointly with a U.S. citizen or resident. The critical factor is whether the total value of your specified foreign financial assets exceeds certain thresholds.

Reporting thresholds for 2015

For taxpayers living in the United States:

• Unmarried (or married filing separately): Must file if 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: Must file if assets exceeded $100,000 on the last day of the tax year OR more than $150,000 at any time during the year

For taxpayers living abroad:

• Unmarried (or married filing separately): Must file if assets exceeded $200,000 on the last day of the tax year OR more than $300,000 at any time during the year
• Married filing jointly: Must file if assets exceeded $400,000 on the last day of the tax year OR more than $600,000 at any time during the year

Living abroad means you're a bona fide resident of a foreign country for an entire tax year or physically present in foreign countries for at least 330 full days during any 12-month period ending in the tax year. IRS.gov

Exception: If you're not required to file a tax return, you don't need to file Form 8938, even if your foreign assets exceed the threshold.

Step-by-Step (High Level)

Step 1: Determine if you must file

Calculate the total value of all your specified foreign financial assets on the last day of 2015 and the maximum value at any point during the year. Compare these figures to the reporting thresholds that apply to your filing status and residency.

Step 2: Gather account and asset information

For each foreign financial account and asset, collect: the name of the institution or issuer, account numbers or identifying information, maximum values during the year, and information about income generated.

Step 3: Determine maximum values

For financial accounts, you can rely on periodic statements unless you know they don't accurately reflect the maximum value. For other assets like foreign stocks, use publicly available information such as year-end trading prices or 52-week highs. Convert all foreign currency amounts to U.S. dollars using the U.S. Treasury Bureau of the Fiscal Service exchange rate. IRS.gov

Step 4: Complete the form

Fill out the identifying information at the top, then complete the relevant parts:

• Part I: Foreign deposit and custodial accounts
• Part II: Other foreign assets (stocks, partnerships, etc.)
• Part III: Summary of tax items
• Part IV: Excepted assets already reported on other forms (Forms 3520, 5471, 8621, 8865)

Step 5: Attach to your tax return

Form 8938 must be attached to your Form 1040 or 1040NR and filed by the due date, including extensions.

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with the FBAR (FinCEN Form 114)

Many taxpayers think filing one form covers both requirements, but they're separate. Form 8938 is filed with your tax return to the IRS; the FBAR is filed separately with the Financial Crimes Enforcement Network (FinCEN). The thresholds and what's reported differ between the two forms. You may need to file both, one, or neither, depending on your specific situation. Filing Form 8938 does not relieve you of the requirement to file the FBAR if you are otherwise required to do so. IRS.gov

Mistake #2: Undervaluing assets or not checking peak values

Remember that the reporting threshold is based on either the year-end value or the maximum value at any time during the year. Some taxpayers only check December 31 values and miss that their assets exceeded the threshold during the year. Always check your statements for the highest balance.

Mistake #3: Thinking U.S. mutual funds with foreign holdings need to be reported

If you hold a U.S. mutual fund that invests in foreign stocks, you don't report it – even though the fund's underlying holdings are foreign. What matters is where the institution maintaining your account is located. IRS.gov

Mistake #4: Not reporting accounts at U.S. branches of foreign banks

Generally, accounts at U.S. branches of foreign financial institutions are treated as domestic accounts and don't need to be reported on Form 8938. A financial account maintained by a U.S. payer, such as a domestic financial institution, is not a specified foreign financial asset. IRS.gov

Mistake #5: Assuming direct ownership of foreign real estate must be reported

Foreign real estate held directly is not a specified foreign financial asset. However, if you hold real estate through a foreign corporation, partnership, or trust, your interest in that entity is reportable. IRS.gov

What Happens After You File

IRS review

Once filed, Form 8938 becomes part of your tax return record. The IRS may use this information to verify that you've properly reported all foreign income on your return. The form helps the IRS identify discrepancies between reported income and foreign asset holdings.

Ongoing obligation

If you continue to meet the reporting thresholds in subsequent years, you'll need to file Form 8938 annually with each tax return. Your foreign asset holdings and their values may change from year to year, so evaluate your filing requirement each tax season.

No immediate action required

Unlike some other forms, there's typically no immediate response or acknowledgment from the IRS after you file Form 8938, assuming everything is in order. The form is simply processed as part of your complete tax return. IRS.gov

If you're audited

Form 8938 provides the IRS with detailed information about your foreign assets. During an audit, the IRS may request additional documentation to verify the information reported, such as foreign account statements, purchase agreements, or valuation documents.

FAQs

1. What are the penalties for not filing Form 8938?

If you're required to file but don't submit a complete and correct Form 8938 by the due date, you face a $10,000 penalty. If the IRS notifies you of the failure and you still don't file within 90 days, you'll incur an additional $10,000 penalty for every 30 days (or partial 30-day period) that you continue to not file, up to a maximum additional penalty of $50,000. Additionally, if you underpay your taxes due to an undisclosed foreign asset, you may face an accuracy-related penalty equal to 40% of the underpayment. Criminal penalties may also apply in serious cases. IRS.gov

2. If I already reported my foreign assets on other IRS forms, do I still need to file Form 8938?

Partially yes, but with a shortcut. If you report specified foreign financial assets on Forms 3520, 3520-A, 5471, 8621, or 8865, you don't have to report them again on Form 8938. However, you must identify on Form 8938 which forms you filed and how many of each. You must still include the value of these assets when determining whether you meet the reporting threshold. IRS.gov

3. How do I value assets denominated in foreign currency?

Convert foreign currency to U.S. dollars using the U.S. Treasury Bureau of the Fiscal Service foreign currency exchange rate. Use the exchange rate from the last day of the tax year (December 31, 2015) to determine both the maximum value and the year-end value. If no Treasury rate is available for your currency, use another publicly available exchange rate and disclose which rate you used on Form 8938. IRS.gov

4. What if I don't know the exact maximum value of my foreign pension?

The IRS recognizes that some assets don't have readily accessible valuation information. For foreign pensions and deferred compensation plans, if you don't know the fair market value based on readily accessible information, the maximum value is the fair market value of any cash or other property distributed to you during the year. If you received no distributions and don't know the value, use a value of zero. This same approach applies when determining whether you've met the reporting threshold. IRS.gov

5. I sold my only foreign asset in October 2015. Do I still need to file?

Yes, if the value of that asset exceeded the reporting threshold at any time during 2015. The reporting requirement is based on whether you exceeded the threshold on the last day of the year or at any time during the year. Even though you no longer held the asset on December 31, if it exceeded the threshold when you sold it (or at any other point during the year), you must file Form 8938. IRS.gov

6. Do my spouse and I each need to file separate Forms 8938?

It depends on how you file your tax return. If you file jointly, you submit one combined Form 8938 with your joint return, reporting all specified foreign financial assets owned by either spouse. If you're married but file separately, you each file your own Form 8938 with your separate returns. For jointly owned assets when filing separately, each spouse includes half the asset's value to determine if they meet the threshold. For individually owned assets, each spouse reports the full value of their own assets. IRS.gov

7. My foreign account is at a U.S.-based bank – do I report it?

No. Accounts maintained by U.S. financial institutions are not specified foreign financial assets, even if the account holds foreign stocks or securities. This includes accounts at U.S. branches of foreign banks. Examples of financial accounts maintained by U.S. financial institutions include U.S. mutual funds accounts, IRAs (traditional or Roth), Section 401(k) retirement accounts, qualified U.S. retirement plans, and brokerage accounts maintained by U.S. financial institutions. IRS.gov