What Form 8938 Is For

Form 8938 is the IRS's way of keeping track of Americans' foreign financial assets. Think of it as a declaration form where you list certain foreign investments and accounts if they exceed specific dollar thresholds. The form was created under the Foreign Account Tax Compliance Act (FATCA) to help the IRS understand what U.S. taxpayers own abroad.

Who needs to file? You might need to file Form 8938 if you're a "specified person"—which includes U.S. citizens, resident aliens, certain non-resident aliens, and even some domestic corporations, partnerships, and trusts. Starting in 2016, certain closely-held domestic entities that hold foreign assets also became subject to these rules.

The form captures two main categories of assets: financial accounts maintained by foreign financial institutions (like bank accounts, brokerage accounts, and mutual funds held overseas) and other foreign financial assets held for investment (such as foreign stocks not held in accounts, interests in foreign partnerships, foreign pension plans, and certain contracts with foreign counterparties). Importantly, Form 8938 is different from the FBAR (FinCEN Form 114)—you may need to file both forms depending on your situation.

IRS About Form 8938

When You’d Use Form 8938

Late/Amended Filing

Form 8938 must be attached to your annual income tax return and filed by the same due date, including extensions. If you filed your 2016 return on time but forgot to include Form 8938, don't panic—the IRS allows you to correct this mistake.

Filing an Amended Return

If you already filed your 2016 tax return without Form 8938, you'll need to file Form 1040X (Amended U.S. Individual Income Tax Return) with Form 8938 attached. The key phrase to remember is: "Do not send a Form 8938 to the IRS unless it is attached to an annual return or an amended return." You cannot simply mail Form 8938 by itself.

Late Filing Options

If you never filed Form 8938 when required, you have several options depending on your circumstances. You can file an amended return as described above, or if the IRS hasn't contacted you yet and your failure was non-willful, you might qualify for the IRS's Delinquent International Information Return Submission Procedures (DIIRSP), which provides a streamlined way to get compliant with reduced penalties.

Time is critical because failing to file Form 8938 can keep the statute of limitations open indefinitely for your entire tax return—meaning the IRS can audit you years later. Additionally, there's an initial penalty of $10,000 for failure to file, which can increase by $10,000 for each 30-day period of continued failure after IRS notification, up to a maximum of $60,000. However, if you can show "reasonable cause" for not filing, penalties may be waived.

IRS 2016 Instructions for Form 8938

Key Rules for 2016

Reporting Thresholds—The Dollar Amounts That Matter

Whether you need to file Form 8938 depends on where you live and your marital status. For 2016, the thresholds were:

Taxpayers living in the United States:

• Unmarried (or married filing separately): Assets valued over $50,000 on the last day of the tax year OR over $75,000 at any time during the year
• Married filing jointly: Assets valued over $100,000 on the last day of the tax year OR over $150,000 at any time during the year

Taxpayers living abroad (if your tax home is in a foreign country and you meet presence tests):

• Unmarried (or married filing separately): Assets valued over $200,000 on the last day of the tax year OR over $300,000 at any time during the year
• Married filing jointly: Assets valued over $400,000 on the last day of the tax year OR over $600,000 at any time during the year

Specified Domestic Entities (new in 2016): Closely-held domestic corporations, partnerships, and certain trusts must file if their specified foreign financial assets exceed $50,000 on the last day of the tax year OR $75,000 at any time during the year.

What Assets Count?

You must report foreign financial accounts (savings accounts, checking accounts, brokerage accounts at foreign banks) and foreign assets held for investment outside of accounts. This includes foreign stocks, bonds issued by foreign entities, interests in foreign partnerships, foreign pension plans, foreign estates, and certain derivative contracts with foreign counterparties.

What Doesn't Count?

Not everything foreign needs to be reported. Foreign currency held directly (not in an account), foreign real estate owned directly, precious metals, art, antiques, and other tangible collectibles are NOT specified foreign financial assets. Also, if you hold foreign stocks in a U.S. brokerage account, you don't report them—the account is domestic, so it's excluded.

IRS Basic Questions and Answers on Form 8938

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 2016 and the maximum value at any point during the year. Compare these amounts to the thresholds for your filing status and location. If you don't exceed the threshold, you don't need to file Form 8938.

Step 2: Identify All Reportable Assets

Make a list of every foreign financial account and foreign asset held for investment. For each asset, gather information including: the name and address of the financial institution or entity, account numbers, dates accounts were opened or closed, and values throughout the year.

Step 3: Calculate Maximum Values

For each asset, determine its fair market value in U.S. dollars. For financial accounts, you can use periodic account statements to determine maximum value during the year. For assets denominated in foreign currency, convert to U.S. dollars using the Treasury's foreign currency exchange rate for the last day of the tax year. You don't need a professional appraisal—a reasonable estimate based on publicly available information is acceptable.

Step 4: Complete the Form

Form 8938 has multiple parts. Part I is for foreign deposit and custodial accounts. Part II is for other foreign assets (stocks, bonds, partnerships, etc.). If you have more than one account or asset in each category, make copies of the relevant parts and attach them. Parts III and IV allow you to report assets already disclosed on other forms like Form 5471 or Form 8621—if you've already reported an asset elsewhere, you may not need to provide all the details again on Form 8938.

Step 5: Attach to Your Tax Return and File

Attach the completed Form 8938 to your Form 1040, 1040NR, or other annual return. File by your tax return due date, including any extensions. The form goes to the IRS with your return—unlike the FBAR, which is filed separately with FinCEN.

IRS Comparison of Form 8938 and FBAR Requirements

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with the FBAR

Many taxpayers think filing one form satisfies both requirements—it doesn't. Form 8938 goes to the IRS with your tax return, while the FBAR (FinCEN Form 114) is filed separately online through FinCEN's BSA E-Filing System. The two forms have different thresholds, different deadlines, and different asset definitions. You may need to file both, one, or neither depending on your situation.

Mistake #2: Forgetting to Report Assets "Held for Investment"

Some taxpayers only report bank accounts and forget about other foreign assets. If you own foreign stocks outside an account, hold an interest in a foreign partnership or trust, or have a foreign pension plan, these need to be reported if they're held for investment and you exceed the threshold.

Mistake #3: Incorrectly Valuing Assets

Don't overthink asset valuation. You can use year-end account statements for financial accounts, publicly available stock prices for securities, and reasonable estimates for other assets. You don't need to hire an appraiser. However, do make sure you're converting foreign currencies correctly using the appropriate exchange rate for the last day of the tax year.

Mistake #4: Reporting Assets Already Disclosed on Other Forms—But Incompletely

If you filed Form 3520, 5471, 8621, or 8865 for certain foreign entities or trusts, you may have already reported some assets. In Part IV of Form 8938, you can list these assets by referencing the other form—but you still need to include them in determining whether you meet the filing threshold. Many taxpayers mistakenly exclude these assets entirely from their threshold calculation.

Mistake #5: Missing the Joint Ownership Rules

If you jointly own an asset with your spouse and file jointly, report the asset once with its full value. If you're married filing separately and both spouses are "specified individuals," you each report the jointly-owned asset on your separate Forms 8938 and each includes the full value—not half. If you jointly own with someone other than your spouse (or your spouse isn't a specified individual), you include the entire value of the jointly-owned asset in your threshold calculation.

Mistake #6: Not Filing Because You Owe No Tax

Form 8938 is an information return. Even if the foreign assets generated no income or you owe no taxes, you must still file if you exceed the threshold. The penalty for not filing isn't based on unpaid taxes—it's a separate $10,000 penalty just for failing to file the form.

Mistake #7: Assuming U.S. Territory Accounts Are Foreign

Accounts in American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands aren't always "foreign" for Form 8938 purposes. Entities organized under U.S. possession laws may be treated differently, so don't automatically assume they're reportable.

What Happens After You File

Processing Your Form 8938

Once you attach Form 8938 to your tax return and file, the IRS processes it along with your return. The information helps the IRS verify that you've properly reported all foreign income and complied with U.S. tax obligations. The IRS may match the information on your Form 8938 against data received directly from foreign financial institutions under FATCA agreements.

If Everything Is Correct

If your Form 8938 is complete and accurate, you likely won't hear anything from the IRS about it. The form becomes part of your tax record for that year. Keep copies of your Form 8938 and all supporting documentation (bank statements, valuation information) for at least six years—the IRS has special statute of limitations rules for international information forms.

If the IRS Has Questions

The IRS may send you a notice requesting additional information or clarification about assets reported on Form 8938. Respond promptly and thoroughly. Common IRS inquiries involve asset valuation, whether certain assets should have been reported, or discrepancies between Form 8938 and other information returns.

If You Failed to File or Made Errors

If the IRS discovers you should have filed Form 8938 but didn't, you'll likely receive a notice. The initial penalty is $10,000, increasing by $10,000 for each 30-day period you continue not to file after notification, up to $60,000. Additionally, if failing to file Form 8938 resulted in an underpayment of tax, you may face a 40% accuracy-related penalty on the underpayment.

However, penalties may be waived if you can demonstrate "reasonable cause" for not filing. Reasonable cause might include reliance on a tax professional who made an error, serious illness, or genuine confusion about the filing requirement. Document everything if you're making a reasonable cause argument.

Impact on Statute of Limitations

Here's an important consequence many people don't know: if you fail to file a required Form 8938, the normal three-year statute of limitations on your entire tax return doesn't start running. This means the IRS can audit your 2016 return years—even decades—later if you never filed Form 8938. Once you file the missing form (even years late), the statute of limitations clock starts ticking.

IRS Summary of FATCA Reporting for U.S. Taxpayers

FAQs

Q1: I have a foreign bank account with $45,000 in it. I'm single and live in the U.S. Do I need to file Form 8938?

Not necessarily. Since you're under the $50,000 year-end threshold, you wouldn't need to file Form 8938 unless the account exceeded $75,000 at any time during the year. However, you may still need to file an FBAR (FinCEN Form 114) if your aggregate foreign accounts exceeded $10,000 at any point—the FBAR has a much lower threshold.

Q2: Can I report foreign real estate on Form 8938?

Foreign real estate owned directly is not a specified foreign financial asset and shouldn't be reported. However, if you own the property through a foreign corporation or partnership, your ownership interest in that foreign entity is reportable on Form 8938 (though the property itself isn't separately listed).

Q3: I have a 401(k) plan that invests in foreign stocks. Do I report this?

No. A retirement account maintained by a U.S. financial institution is not a specified foreign financial asset, regardless of what it invests in. If the 401(k) itself were maintained by a foreign bank, it would be reportable, but U.S.-based retirement accounts aren't.

Q4: My foreign pension is worth about $80,000, but I don't know the exact value. What do I report?

If you don't know the fair market value of your foreign pension and you didn't receive any distributions in 2016, you can report the value as zero. If you received distributions, report the total value of what you received during the year as the maximum value. The IRS recognizes that some foreign pension values aren't easily accessible.

Q5: I'm married to a non-U.S. person who isn't required to file U.S. taxes. We jointly own a foreign account worth $200,000. Do I need to file Form 8938?

Yes, if you're filing as married filing separately and live in the U.S., you include the entire value of the jointly-owned account in your calculation. Since $200,000 exceeds your $50,000 year-end threshold, you must file Form 8938 and report the full account value.

Q6: What's the difference between Form 8938 and the FBAR?

Both forms report foreign financial accounts, but they're different. The FBAR is filed separately with FinCEN (not with your tax return), has a $10,000 aggregate threshold, is due April 15 with an automatic extension to October 15, and covers anyone with signature authority over foreign accounts. Form 8938 is filed with your tax return, has higher thresholds (ranging from $50,000 to $600,000 depending on circumstances), and covers foreign financial accounts plus other foreign assets held for investment. Many people must file both forms.

Q7: I just realized I should have filed Form 8938 with my 2016 return, but the statute of limitations has passed. Should I still file it?

Yes. Until you file Form 8938, the statute of limitations on your entire 2016 tax return never closes under IRC Section 6501(c)(8). This means the IRS can audit your return at any time. File an amended return with Form 8938 attached to start the statute of limitations running. Even though it's late, filing protects you from indefinite audit exposure and shows good faith compliance, which may help if the IRS assesses penalties.

Additional Resources

Note: This summary is based on the 2016 version of Form 8938 and its instructions. Tax laws and forms change over time. For tax years after 2016, consult the current year's instructions. If you have complex foreign holdings or are uncertain about your filing obligations, consider consulting a tax professional specializing in international tax compliance.