What the Form Is For

Form 8938 is an IRS reporting requirement that helps the government track foreign financial assets held by U.S. taxpayers. Think of it as a disclosure form where you tell the IRS about certain financial accounts and investments you hold outside the United States. This form was introduced as part of the Foreign Account Tax Compliance Act (FATCA) to improve tax compliance and combat offshore tax evasion.

The form requires you to report "specified foreign financial assets"—which includes foreign bank accounts, foreign stocks and securities (if not held in an account), interests in foreign partnerships, foreign retirement plans, and certain financial contracts with foreign entities. Importantly, you must file this form even if these assets produced no taxable income during the year, as long as you meet the reporting thresholds.

Form 8938 is different from the FBAR (FinCEN Form 114), which is another foreign account reporting requirement. Many taxpayers must file both forms, but they're submitted separately—Form 8938 attaches to your tax return, while the FBAR goes to the Financial Crimes Enforcement Network.

When You’d Use Form 8938

Original Filing

Form 8938 must be attached to your annual income tax return (Forms 1040, 1040-NR, 1041, 1065, or 1120) and filed by the tax return's due date, including extensions. For most individual taxpayers filing Form 1040 for the 2019 tax year, this means the form was due by April 15, 2020, or October 15, 2020, if you filed for an extension.

Late Filing

If you missed filing Form 8938 with your original return, you should file an amended return as soon as possible. Use Form 1040-X (Amended U.S. Individual Income Tax Return) and attach the completed Form 8938 to it. The IRS explicitly states: "If you omitted Form 8938 when you filed your income tax return, you should file Form 1040-X, Amended U.S. Individual Income Tax Return, with your Form 8938 attached."

Important: Do not send Form 8938 to the IRS by itself—it must be attached to either an original tax return or an amended return.

Exception

Here's good news: If you aren't required to file a tax return for the year, you don't need to file Form 8938, even if your foreign assets exceed the reporting thresholds. The form is only required when you're already filing a return.

Key Rules or Details for 2019

Who Must File

You must file Form 8938 if you're a "specified person" with an interest in specified foreign financial assets exceeding certain thresholds. Specified persons include:

• U.S. citizens (living anywhere)
• Resident aliens (green card holders or those meeting the substantial presence test)
• Certain nonresident aliens (those married filing jointly with a U.S. spouse, or bona fide residents of U.S. territories)
• Certain domestic entities (closely held corporations, partnerships, and trusts meeting specific criteria)

2019 Reporting Thresholds

For taxpayers living in the United States:

• Unmarried (or married filing separately): Total value 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: Total value 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 (tax home in a foreign country and meeting presence tests):

• Unmarried (or married filing separately): Total value 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: Total value exceeded $400,000 on the last day of the tax year OR more than $600,000 at any time during the year

For specified domestic entities:

• Total value exceeded $50,000 on the last day of the tax year OR more than $75,000 at any time during the year

What Assets to Report

Must be reported:

• Foreign bank and investment accounts
• Foreign stocks and securities (if not held in an account)
• Interests in foreign partnerships or corporations
• Foreign retirement and pension plans
• Interests in foreign trusts and estates
• Financial contracts with foreign counterparties (swaps, options, derivatives)

Not reportable:

• U.S.-based accounts (even if they hold foreign stocks)
• Foreign real estate held directly (though interests in foreign entities holding real estate must be reported)
• Foreign currency held directly
• Tangible assets like art, jewelry, or precious metals
• Foreign Social Security

Step-by-Step (High Level)

Step 1: Determine if you're a specified person

Review whether you're a U.S. citizen, resident alien, or other covered person required to file.

Step 2: Identify all your specified foreign financial assets

Make a complete inventory of your foreign financial accounts and assets. Include anything where income, gains, or distributions would be reportable on your tax return.

Step 3: Calculate the maximum value during the tax year

For each asset, determine both the value on December 31, 2019, and the highest value at any point during 2019. You can rely on periodic bank statements for accounts and don't need professional appraisals for most assets. Convert foreign currency values to U.S. dollars using the Treasury's exchange rates.

Step 4: Check if you meet the reporting threshold

Add up all your specified foreign financial assets to see if the total exceeds the threshold that applies to your filing status and residence.

Step 5: Complete Form 8938

If you exceed the threshold, report each asset in the appropriate section. Part I covers foreign deposit and custodial accounts. Part II covers other foreign assets like stocks, partnership interests, and contracts. Part III addresses foreign accounts reported on other forms. Part IV lists any exceptions you're claiming.

Step 6: Attach to your tax return and file

Attach the completed Form 8938 to your annual income tax return (typically Form 1040 for individuals) and file by the due date, including any extensions.

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with the FBAR

Many taxpayers think filing one form covers both requirements. Form 8938 attaches to your tax return and goes to the IRS, while the FBAR is filed separately with FinCEN by April 15 (with an automatic extension to October 15). Check both sets of requirements—you may need to file both.

Mistake #2: Not reporting assets that didn't generate income

Form 8938 requires reporting all covered assets that exceed thresholds, even if they produced zero income or gains during 2019. The form is about disclosure, not just taxable events.

Mistake #3: Reporting U.S. accounts containing foreign investments

If your brokerage account is with a U.S. financial institution (like Schwab or Fidelity), you don't report it on Form 8938, even if the account holds foreign stocks or mutual funds. Only accounts maintained by foreign financial institutions are reportable.

Mistake #4: Incorrectly valuing jointly owned assets

If you're married filing jointly, report jointly owned assets once at their full value. If you're married filing separately, you each report the jointly owned asset at its full value (not split in half). For joint ownership with non-spouses, report the full value of the asset.

Mistake #5: Forgetting about foreign retirement accounts

Many expatriates forget to report interests in foreign pension plans or deferred compensation plans. These are specified foreign financial assets if you have an interest in them, even if they're not yet distributing payments.

Mistake #6: Using the wrong exchange rate or valuation date

Always use the exchange rate from the last day of the tax year (December 31, 2019) for converting foreign currency values, even for assets you sold earlier in the year. The IRS specifies using the U.S. Treasury Bureau of the Fiscal Service rates.

What Happens After You File

Initial Processing

Once you file Form 8938 with your tax return, the IRS processes it as part of your overall return. The information you provide helps the IRS match your reported foreign income with information they receive from foreign financial institutions under FATCA reporting agreements.

No Immediate Response

In most cases, if your Form 8938 is complete and filed on time, you won't hear anything from the IRS. The form becomes part of your permanent tax record.

If You Made an Error

If you discover an error after filing, file an amended return (Form 1040-X) with a corrected Form 8938 attached. It's better to correct mistakes voluntarily than to wait for the IRS to discover them.

Penalties for Non-Compliance

The IRS takes Form 8938 seriously. If you fail to file when required, the penalty is $10,000 for each failure. If you don't file after receiving IRS notification, there's an additional penalty of up to $10,000 for each 30-day period the failure continues, up to a maximum additional penalty of $50,000. A 40 percent penalty applies on understatements of tax attributable to non-disclosed assets. Criminal penalties may also apply in cases of willful non-compliance.

Reasonable Cause Exception

Penalties can be waived if you can show reasonable cause for not filing or for filing an incomplete or incorrect form. The burden is on you to demonstrate reasonable cause.

Statute of Limitations Impact

Failing to file Form 8938 when required can affect the statute of limitations for your entire tax return. If you omit from gross income more than $5,000 that is attributable to a specified foreign financial asset, the statute of limitations is extended to six years. If you fail to file or properly report an asset on Form 8938, the statute of limitations for the tax year is extended to three years following the time you provide the required information.

FAQs

Q1: Do I need to report my foreign real estate on Form 8938?

No, directly owned foreign real estate is not a specified foreign financial asset. However, if you hold the property through a foreign corporation, partnership, trust, or other entity, your interest in that entity may be reportable. The value of the real estate is considered when valuing your interest in the entity.

Q2: I have a U.S. brokerage account that holds foreign stocks. Do I report it?

No. Financial accounts maintained by U.S. financial institutions are not reportable on Form 8938, regardless of what investments they contain. This includes IRAs, 401(k) plans, and brokerage accounts at U.S. firms.

Q3: I closed my foreign account in October 2019. Do I still need to report it?

Yes, if the account's value at any point during 2019 contributed to you exceeding the reporting threshold. The thresholds look at both year-end values and any-time-during-the-year values. Even though you closed the account before December 31, you must report it if it pushed you over the threshold during the year.

Q4: Do I need a professional appraisal to value my assets?

No. The IRS explicitly states that you don't need to hire certified appraisers or actuaries. For financial accounts, you can rely on periodic account statements. For other assets, you can use publicly available information from reliable financial sources to reasonably estimate fair market value. A reasonable estimate of the fair market value will be sufficient for reporting purposes.

Q5: What's the difference between Form 8938 and the FBAR?

Both forms report foreign financial accounts, but they're separate requirements with different rules. Form 8938 has higher reporting thresholds, covers more types of assets (like foreign stocks held directly), and attaches to your tax return filed with the IRS. The FBAR has a lower $10,000 threshold, only covers financial accounts, and files separately with FinCEN. Many people must file both.

Q6: I'm a U.S. citizen living abroad and contribute to a foreign pension plan through my employer. Is this reportable?

Yes. Interests in foreign retirement plans and foreign deferred compensation plans are specified foreign financial assets. If you meet the applicable reporting threshold (higher for those living abroad), you must report your interest in the plan on Form 8938.

Q7: What if I genuinely didn't know about the Form 8938 requirement for 2019?

Lack of awareness isn't automatically reasonable cause, but you should still file the form immediately by submitting an amended return. Consider consulting a tax professional about whether you qualify for any penalty relief programs, such as the IRS Streamlined Filing Compliance Procedures for taxpayers with non-willful violations. The key is to come into compliance as soon as possible.

For More Information

IRS Form 8938 page: IRS.gov/Form8938
FATCA information: IRS.gov (search "Summary of FATCA reporting for U.S taxpayers")
Form 8938 FAQs: IRS.gov (search "Basic questions and answers on Form 8938")
Form 8938 vs. FBAR comparison: IRS.gov (search "Comparison of Form 8938 and FBAR requirements")

This summary is based on 2019 tax year rules and IRS guidance. Tax laws and reporting requirements may change. Consult a qualified tax professional for advice specific to your situation.