What the Form Is For

Form 8938 is an IRS reporting form that U.S. taxpayers use to disclose their foreign financial holdings when those assets exceed certain dollar thresholds. Created under the Foreign Account Tax Compliance Act (FATCA), the form helps the IRS track offshore assets and ensure that taxpayers properly report worldwide income.

Think of Form 8938 as your declaration of substantial foreign investments—whether that's a bank account in London, stock in a Tokyo company, or an interest in a foreign partnership. The form requires you to list what you own abroad, where it's held, who issued it, and its maximum value during the year. This is purely an informational return—you're not paying tax directly through Form 8938, but the IRS uses it to verify that you've properly reported income from these assets on your regular tax return.

Importantly, Form 8938 is not the same as the FBAR (FinCEN Form 114), though they overlap in some areas. You may need to file one, both, or neither depending on your specific circumstances. The key distinction: Form 8938 attaches to your tax return and covers a broader range of assets, while the FBAR is filed separately and focuses specifically on foreign bank and financial accounts. Source

When You'd Use It (Including Late/Amended Filings)

Regular Filing: You must file Form 8938 with your annual tax return if you're a "specified person" (a U.S. citizen, resident alien, or certain nonresident aliens) whose foreign financial assets exceed the reporting threshold for your filing status and location. The form attaches to your tax return (Forms 1040, 1040NR, 1041, 1065, 1120, 1120-S) and is due by your tax return deadline, including any extensions.

Late Filing: If you discover after filing your tax return that you should have included Form 8938 but didn't, you need to file an amended tax return—Form 1040X for individuals—with Form 8938 attached. Important: You cannot send Form 8938 to the IRS as a standalone document. It must always be attached to either your original return or an amended return.

Amended Filing: Similarly, if you filed Form 8938 but later realize you made errors (wrong values, missed accounts, incorrect information), you must file an amended return with a corrected Form 8938. This is crucial because penalties can be severe, and filing corrections promptly may help you avoid or reduce penalties by demonstrating reasonable cause rather than willful neglect. Source

Key Rules for 2018

Reporting Thresholds

For taxpayers living in the United States:

• Single/Married filing separately: File if assets exceed $50,000 on the last day of the tax year OR $75,000 at any time during the year
• Married filing jointly: File if assets exceed $100,000 on the last day of the year OR $150,000 at any time during the year

For taxpayers living abroad (tax home in a foreign country and meeting presence abroad tests):

• Single/Married filing separately: File if assets exceed $200,000 on the last day of the year OR $300,000 at any time during the year
• Married filing jointly: File if assets exceed $400,000 on the last day of the year OR $600,000 at any time during the year

What Must Be Reported

• Financial accounts at foreign banks, brokerages, and similar institutions
• Foreign stocks and securities held outside of financial accounts
• Interests in foreign partnerships, corporations, trusts, and estates
• Foreign pension and deferred compensation plans
• Contracts with foreign counterparties (swaps, options, derivatives)
• Any interest in a foreign entity

What's NOT Reported

Direct holdings of foreign currency, foreign real estate held directly (not through an entity), tangible assets like gold or art, foreign Social Security-type benefits, and accounts at U.S.-based financial institutions (even if they hold foreign stocks). Source

Step-by-Step Filing Process (High Level)

Step 1: Determine if you're a "specified person."

Are you a U.S. citizen, resident alien, or certain nonresident aliens? If not, you don't need to file.

Step 2: Calculate your total foreign asset values.

Look at all your foreign financial assets on December 31, 2018, and also determine the highest combined value at any point during the year. Convert foreign currency values to U.S. dollars using the U.S. Treasury Bureau of Fiscal Service exchange rate as of December 31.

Step 3: Check if you exceed the threshold.

Compare your totals from Step 2 to the thresholds for your filing status and location.

Step 4: Gather documentation.

Collect year-end statements for all foreign accounts, ownership documents for foreign stocks/entities, and any other records showing maximum values during the year.

Step 5: Complete the form sections:

• Part I: List all foreign deposit and custodial accounts
• Part II: Report other foreign financial assets (stocks, partnership interests, contracts)
• Part III: Provide summary information
• Part IV: Note if you've already reported certain assets on other forms (3520, 5471, 8621, etc.)

Step 6: Attach to your tax return.

Form 8938 cannot be filed separately—it must be attached to your annual income tax return (or amended return if filing late).

Step 7: File by the deadline.

The deadline is the same as your tax return deadline, including extensions.

Common Mistakes and How to Avoid Them

Mistake #1: Filing Form 8938 separately from the tax return. Form 8938 is not a standalone form. Always attach it to Form 1040, 1040NR, or the relevant business return. Never mail it separately to the IRS.

Mistake #2: Confusing Form 8938 with the FBAR. These are different forms with different requirements. Form 8938 attaches to your tax return and covers a broader asset base. The FBAR (FinCEN Form 114) is filed separately and focuses on foreign bank accounts. You may need to file one or both. When in doubt, check the IRS comparison chart.

Mistake #3: Using year-end values only. You must report the maximum value of each asset at any point during the year, not just its December 31 value. Review monthly statements to identify peak values.

Mistake #4: Ignoring assets reported on other forms. Even if you report foreign assets on Forms 3520, 5471, 8621, or 8865, you still include their value when determining if you meet the filing threshold. If you meet the threshold, you can reference those other forms in Part IV instead of duplicating the information.

Mistake #5: Not converting foreign currency correctly. All values must be reported in U.S. dollars. Use the U.S. Treasury exchange rate from December 31 of the tax year, not the rate on the date of acquisition or sale.

Mistake #6: Forgetting assets in disregarded entities. If you own a single-member LLC or other entity that's disregarded for tax purposes, you must report any foreign assets it holds as if you owned them directly.

Mistake #7: Applying the wrong threshold. Thresholds differ dramatically based on where you live and your filing status. Living abroad doubles the thresholds. Make sure you're using the correct benchmark for your situation. Source

What Happens After You File

Processing: Once you file Form 8938 with your tax return, the IRS processes it as part of your overall return. The information is used to verify that you've properly reported foreign income on your tax return and to cross-check against information the IRS receives from foreign financial institutions under FATCA agreements.

Potential IRS Contact: If the IRS identifies discrepancies between your Form 8938 and income reported on your return—or information they receive from foreign banks—you may receive a letter requesting additional information or clarification. Respond promptly and provide complete documentation.

Extended Statute of Limitations: Filing Form 8938 affects how long the IRS can audit your return. If you fail to file Form 8938 or omit a required asset, the statute of limitations for your entire tax return remains open for at least three years after you file a complete and correct Form 8938. If you omit more than $5,000 in gross income related to foreign assets, the IRS has six years (instead of the normal three) to assess additional tax.

No Direct Tax Due: Form 8938 itself doesn't generate a tax bill—it's informational. However, it helps the IRS ensure you've paid the proper tax on income from these assets (interest, dividends, capital gains, etc.) on your main tax return.

Frequently Asked Questions

Q1: Do I need both Form 8938 and the FBAR?

Yes, possibly. They have different requirements and reporting thresholds. Some accounts may need to be reported on both forms. Filing one doesn't exempt you from filing the other if you meet both sets of requirements. The FBAR has a separate filing deadline (typically April 15 with an automatic extension to October 15) and is filed electronically through FinCEN, not with your tax return.

Q2: What if I don't file Form 8938 when required?

The penalties are steep. You face an immediate $10,000 penalty for failure to file. If you don't correct the omission within 90 days of IRS notice, you incur an additional $10,000 penalty for each 30-day period, up to a maximum additional $50,000. Plus, if you underpaid taxes on undisclosed foreign assets, you face a 40% accuracy-related penalty on the underpayment (or 75% if the IRS determines fraud). Criminal penalties may also apply in egregious cases.

Q3: I don't receive income from my foreign accounts. Do I still need to file?

If your foreign assets exceed the threshold for your situation, yes. Form 8938 is required regardless of whether the assets produce income or affect your tax liability. The form is about disclosure and transparency, not just taxation.

Q4: Does foreign real estate count toward the threshold?

No, if you own foreign real estate directly. However, if you own foreign real estate through a foreign corporation, partnership, or trust, your interest in that entity is a specified foreign financial asset that counts toward your threshold and must be reported. The value of the real estate affects the value of your interest in the entity.

Q5: What if I can't determine the exact value of a foreign asset?

You don't need a professional appraisal. You can use periodic account statements for financial accounts, publicly available information for traded securities, and reasonable estimates based on verifiable sources for other assets. The IRS acknowledges that precise valuations may not always be possible and accepts reasonable good-faith estimates.

Q6: Are retirement accounts held in foreign countries reportable?

Foreign pension plans and deferred compensation plans are reportable if they meet the definition of specified foreign financial assets and you exceed the threshold. However, foreign Social Security or similar government social insurance programs are not reportable.

Q7: What if I'm married to a nonresident alien?

If you're married to someone who isn't a U.S. person and you file separately, you use the "married filing separately" thresholds, but you include the entire value of any jointly owned assets (not just half) when calculating your threshold. Your spouse, if not a specified person, doesn't need to file Form 8938.

For complete details and the most current information, always refer to the official IRS instructions at IRS.gov/Form8938 and consult with a qualified tax professional for your specific situation.