What Form 8938 Is For

Form 8938 is an IRS tax form that U.S. taxpayers use to report certain foreign financial assets they own. Think of it as a disclosure statement that helps the IRS track financial assets held outside the United States. This form was created under the Foreign Account Tax Compliance Act (FATCA) to combat offshore tax evasion and ensure Americans properly report their worldwide income.

The form requires you to report specified foreign financial assets if their total value exceeds certain thresholds. These assets include foreign bank accounts, foreign stocks and securities, interests in foreign partnerships or corporations, foreign pension plans, and certain financial instruments with foreign counterparties. It's important to understand that Form 8938 is not the same as the FBAR (FinCEN Form 114)—you may need to file both forms depending on your situation, as they have different requirements and filing procedures.

IRS.gov - About Form 8938

When You’d Use Form 8938 (Filing Late or Amended Returns)

You must file Form 8938 attached to your annual tax return (Form 1040, 1040-NR, or 1040-SR) by the same due date, including extensions. For tax year 2020, this means the form was originally due April 15, 2021, or October 15, 2021, if you filed for an extension.

If you forgot to file Form 8938 originally, you need to file an amended return. Use Form 1040-X (Amended U.S. Individual Income Tax Return) and attach your completed Form 8938 to correct this omission. The IRS explicitly states in its instructions that if you realize you should have filed Form 8938 with your return but didn't, filing an amended return with the attached form is the proper remedy.

You cannot send Form 8938 to the IRS by itself—it must always be attached to either your original tax return or an amended return. This is critical because standalone submissions will not be processed.

IRS.gov - Basic Questions and Answers on Form 8938

Key Rules or Details for 2020

Who Must File

You must file if you're a “specified person”—this includes U.S. citizens, resident aliens (green card holders or those meeting the substantial presence test), and certain domestic entities like closely-held corporations, partnerships, and trusts.

Reporting Thresholds for 2020

Living in the United States

• Single or married filing separately: Assets exceeded $50,000 on December 31, 2020, OR exceeded $75,000 at any time during 2020
• Married filing jointly: Assets exceeded $100,000 on December 31, 2020, OR exceeded $150,000 at any time during 2020

Living Outside the United States

• Single or married filing separately: Assets exceeded $200,000 on December 31, 2020, OR exceeded $300,000 at any time during 2020
• Married filing jointly: Assets exceeded $400,000 on December 31, 2020, OR exceeded $600,000 at any time during 2020

Important Exception: If you're not required to file an income tax return for 2020, you don't have to file Form 8938, even if your foreign assets exceed the thresholds.

What Must Be Reported

Financial accounts at foreign financial institutions (banks, brokerages), foreign stocks or securities not held in accounts, interests in foreign partnerships or corporations, foreign pension and deferred compensation plans, foreign trusts and estates, and certain financial instruments (swaps, derivatives) with foreign counterparties.

What’s NOT Reported

Foreign real estate held directly, foreign currency held directly (cash), precious metals and collectibles held directly, U.S.-based financial accounts (even if they contain foreign investments), and accounts with U.S. branches of foreign banks.

IRS.gov - Comparison of Form 8938 and FBAR requirements

Step-by-Step (High Level)

Step 1: Determine if You're a Specified Person

Confirm you're a U.S. citizen, resident alien, or specified domestic entity required to file a tax return.

Step 2: Identify Your Specified Foreign Financial Assets

Make a list of all foreign bank accounts, foreign investments held outside of accounts, foreign pension interests, and other qualifying assets. Remember, jointly owned assets count toward your threshold calculation.

Step 3: Calculate Total Value

Determine the maximum value of each asset during 2020 in U.S. dollars. For accounts, use the highest balance shown on periodic statements. For assets denominated in foreign currency, use the U.S. Treasury Bureau of Fiscal Service exchange rates (available at fiscal.treasury.gov).

Step 4: Check if You Meet the Reporting Threshold

Add up all your specified foreign financial assets and compare the total to your applicable threshold based on your filing status and residence.

Step 5: Complete the Form

If you exceed the threshold, fill out Form 8938. Part I covers financial accounts; Part II covers other foreign assets like stocks and business interests. For each asset, report identifying information, maximum value during the year, and any income generated.

Step 6: Attach to Your Tax Return

Include Form 8938 with your Form 1040, 1040-NR, or 1040-SR when you file. The form follows the same filing deadline as your tax return, including extensions.

2020 Instructions for Form 8938

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with FBAR

These are two separate requirements with different thresholds and filing procedures. Form 8938 is filed with your tax return; FBAR is filed separately with FinCEN by April 15 (with automatic extension to October 15). Many taxpayers need to file both.

Mistake #2: Forgetting Jointly Owned Assets

If you jointly own an asset with a non-spouse or your spouse who files separately, you must report the entire value of the asset, not just your share. Only married couples filing jointly report jointly owned assets once.

Mistake #3: Miscalculating the Threshold

There are two threshold tests: value on the last day of the year and the maximum value at any time during the year. You meet the threshold if you exceed either one. Also, count all specified foreign assets even if some are reported on other forms.

Mistake #4: Not Reporting Assets in U.S. Accounts

If you hold foreign stocks through a U.S. brokerage, those holdings don't need to be reported on Form 8938 (the account isn't foreign). However, foreign stocks held directly or in a foreign brokerage account must be reported.

Mistake #5: Ignoring Zero-Value or Negative-Value Assets

If you're required to file, report all assets even if they have minimal or zero value. If an asset's value is less than zero, report it as zero.

Mistake #6: Using Incorrect Currency Conversion

Always use the exchange rate from the last day of the tax year (December 31, 2020) when reporting maximum values, even if you sold the asset earlier in the year. You can find official rates at fiscal.treasury.gov or use the rate from annual account statements.

What Happens After You File

Once you file Form 8938 with your tax return, the IRS uses the information to verify you're properly reporting income from foreign assets. The form is part of your tax return, so it follows the same processing timeline—typically several weeks to a few months for the IRS to process.

If Everything Is Correct

You'll receive no specific notification about Form 8938. The IRS considers it processed along with your tax return.

If There Are Issues

The IRS may send you a notice requesting clarification or additional information. Respond promptly to avoid penalties.

Penalties for Non-Compliance

Failure to file Form 8938 when required carries significant penalties. The initial penalty is $10,000 for not filing. If you don't file after IRS notification, you face an additional $10,000 penalty for each 30-day period of continued failure, up to a maximum of $50,000. Beyond monetary penalties, failing to report a specified foreign financial asset can result in an extended statute of limitations—the IRS has six years (instead of the normal three) to assess additional taxes related to that asset.

Criminal Penalties

In cases of willful failure to file, criminal penalties may also apply.

Reasonable Cause Exception

Penalties may be waived if you can show your failure to file was due to reasonable cause and not willful neglect.

IRS.gov - FATCA Information for Individuals

FAQs

Q1: Do I need to report my foreign retirement account or foreign Social Security?

Foreign pension plans and deferred compensation plans must be reported if they're not government social insurance programs. Private foreign retirement accounts (like a foreign 401(k) equivalent) are reportable. However, foreign government-provided social security or similar social insurance benefits do not need to be reported on Form 8938.

Q2: I own a vacation home in France. Do I report it 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 corporation, partnership, or trust, you must report your interest in that entity (not the property itself) if you meet the filing threshold.

Q3: My foreign bank account had $60,000 in January but only $45,000 on December 31. Do I need to file?

If you're single and living in the United States, yes. You meet the threshold because your assets exceeded $50,000 at any time during the year (the $60,000 in January), even though they were below $50,000 on the last day of the year.

Q4: I have a U.S. brokerage account that holds foreign stocks. Is this reportable?

No. Accounts maintained by U.S. financial institutions are not reportable on Form 8938, regardless of what investments they hold. This includes U.S. mutual funds, IRAs, 401(k) plans, and U.S. brokerage accounts—even if they invest in foreign securities.

Q5: Can I file Form 8938 by itself if I forgot to include it with my original return?

No. Form 8938 cannot be filed standalone. If you forgot to include it with your original return, you must file Form 1040-X (Amended U.S. Individual Income Tax Return) with Form 8938 attached. The IRS will not process a Form 8938 sent by itself.

Q6: How do I value foreign assets if there are no account statements?

You may use publicly available information from reliable financial sources or other verifiable sources to estimate fair market value. You do not need to hire a professional appraiser—a reasonable estimate based on available information is sufficient. The IRS instructions specifically state that third-party appraisals are not required.

Q7: I filed FBAR. Do I still need to file Form 8938?

Possibly. Form 8938 and FBAR are separate requirements with different rules. Some foreign accounts must be reported on both forms, some on only one, and some on neither. Review both sets of requirements independently. Filing one does not satisfy the requirement to file the other.

Key Takeaway: Form 8938 is a crucial compliance requirement for U.S. taxpayers with foreign financial assets. The key is understanding whether your total foreign assets exceed the applicable threshold for your situation. When in doubt, consult with a tax professional familiar with international tax reporting requirements. The penalties for non-compliance are substantial, but the reporting process is straightforward once you understand the rules.

For the most current information and updates, always visit IRS.gov/Form8938.