What Form 8938 Is For

Form 8938 is an IRS reporting requirement under the Foreign Account Tax Compliance Act (FATCA) that requires certain U.S. taxpayers to disclose their specified foreign financial assets. Think of it as a disclosure form that tells the IRS about your foreign investments and accounts—everything from foreign bank accounts to overseas stock holdings to interests in foreign partnerships. IRS.gov

The form exists to improve tax compliance by making it harder for taxpayers to hide income and assets abroad. It's important to understand that Form 8938 is not the same as the Foreign Bank Account Report (FBAR), though they cover some overlapping territory. You may need to file both forms depending on your situation, as filing one doesn't satisfy the requirement for the other. IRS.gov

Form 8938 only applies if you're required to file a U.S. tax return and your specified foreign financial assets exceed certain dollar thresholds. If you don't meet those thresholds or aren't required to file a tax return, you don't need to file Form 8938.

When You’d Use Form 8938

Regular Filing

Form 8938 is attached to your annual income tax return (Form 1040, 1040-NR, or other applicable returns) and must be filed by the same due date, including extensions. For the 2022 tax year, this typically means April 18, 2023, or October 16, 2023, if you filed for an extension.

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 return using Form 1040-X (Amended U.S. Individual Income Tax Return) with Form 8938 attached. The IRS takes missing Form 8938 seriously, so it's better to correct the oversight voluntarily rather than wait for the IRS to discover it. IRS.gov

Amended Filing

If you previously filed Form 8938 but made errors—such as reporting incorrect values, omitting assets, or providing incomplete information—you should file an amended Form 8938 with Form 1040-X to correct these mistakes. Include a statement explaining the corrections you're making.

Reasonable Cause

The IRS may waive penalties for late or incorrect filing if you can demonstrate "reasonable cause" and show that the failure was not due to willful neglect. Reasonable cause is evaluated case-by-case and might include circumstances like serious illness, natural disasters, reliance on incorrect professional advice, or other extraordinary situations beyond your control. IRS.gov Attach a detailed statement explaining your reasonable cause when filing your amended return.

Key Rules or Details for 2022

Filing Thresholds

Whether you need to file Form 8938 depends on your filing status, where you live, and the total value of your specified foreign financial assets.

For U.S. Residents (living in the United States)

• Unmarried or Married Filing Separately: More than $50,000 on the last day of the tax year OR more than $75,000 at any time during the year
• Married Filing Jointly: More than $100,000 on the last day of the tax year OR more than $150,000 at any time during the year

For U.S. Taxpayers Living Abroad

• Unmarried or Married Filing Separately: More than $200,000 on the last day of the tax year OR more than $300,000 at any time during the year
• Married Filing Jointly: More than $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

Certain domestic corporations, partnerships, and trusts: More than $50,000 on the last day of the tax year OR more than $75,000 at any time during the year. IRS.gov

What Must Be Reported

You must report specified foreign financial assets, which include:

• Financial accounts maintained by foreign financial institutions (savings, checking, brokerage accounts, etc.)
• Foreign financial assets held for investment that are not in an account, such as:
  • Stock or securities issued by foreign corporations
  • Interests in foreign partnerships, trusts, or estates
  • Foreign bonds, notes, or debentures
  • Foreign pension or deferred compensation plans
  • Derivatives, swaps, options, or other financial contracts with foreign counterparties

What You Don’t Report

• U.S. bank accounts, IRAs, 401(k)s, or other U.S. retirement accounts—even if they hold foreign stocks
• Foreign real estate held directly (though interests in foreign entities that own real estate must be reported)
• Foreign currency held directly (not in an account)
• Tangible assets like precious metals, art, or collectibles held directly
• Foreign social security or similar government benefits IRS.gov

Step-by-Step (High Level)

Step 1: Determine if You Must File

Calculate the total value of your specified foreign financial assets using the maximum value during the year and the value on December 31. Compare these amounts to the thresholds for your filing status and residence.

Step 2: Identify What to Report

Make a comprehensive list of all specified foreign financial assets. For accounts, gather year-end and maximum value statements. For assets not held in accounts (like foreign stocks held directly), research fair market values using reliable financial sources. You don't need to hire professional appraisers; reasonable estimates based on publicly available information are acceptable.

Step 3: Convert to U.S. Dollars

Convert all foreign currency values to U.S. dollars using the Treasury Department's exchange rate for the last day of the tax year. The IRS provides a currency converter tool on its website.

Step 4: Complete Form 8938

Fill out the form sections:

• Part I: Report foreign deposit and custodial accounts
• Part II: Report other foreign assets (stocks, partnerships, derivatives, etc.)
• Part III: Summarize the types of assets
• Part IV: Indicate if assets are reported on other forms (like Forms 3520, 5471, 8621, or 8865)—if so, you may not need to provide full details again on Form 8938

If you have more assets than fit on the form, attach additional sheets.

Step 5: Attach to Your Tax Return

Form 8938 must be filed as an attachment to your income tax return (Form 1040, 1040-NR, etc.). It cannot be filed separately. Submit everything together by your return's due date, including any extensions.

Step 6: Keep Records

Retain copies of account statements, valuation documentation, and all supporting materials for at least six years. The statute of limitations for returns with unreported foreign assets can extend up to six years. IRS.gov

Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with FBAR

Many taxpayers think filing one form covers both requirements. Form 8938 and FBAR (FinCEN Form 114) are separate forms with different thresholds, different filing locations, and different deadlines. FBAR is filed directly with FinCEN (not the IRS) and has a $10,000 threshold. You may need to file both. Review both sets of requirements separately. IRS.gov

Mistake #2: Using the Wrong Threshold

Double-check whether you're classified as living inside or outside the United States, as the thresholds differ dramatically. The IRS generally considers you to live abroad if you're a bona fide resident of a foreign country or present outside the U.S. for at least 330 days during a 12-month period.

Mistake #3: Not Reporting Assets Already Disclosed Elsewhere

Even if you report assets on Forms 3520, 5471, 8621, or other international forms, you must still indicate those assets on Form 8938 Part IV. The IRS allows abbreviated reporting—you note the form numbers and how many you filed—but you can't simply skip Form 8938 entirely.

Mistake #4: Reporting U.S. Accounts That Hold Foreign Investments

Don't report your U.S.-based brokerage account just because it holds foreign stocks. Only report accounts maintained by foreign financial institutions or foreign assets held directly outside of any account.

Mistake #5: Undervaluing or Omitting Asset Values

If you fail to provide sufficient information for the IRS to determine an asset's value, the IRS can presume you met the reporting threshold, potentially subjecting you to penalties. Always make reasonable good-faith efforts to determine values, even if precision isn't possible.

Mistake #6: Missing the Deadline

Form 8938 must be filed with your tax return, not separately or later. If you miss the deadline, file an amended return immediately to minimize penalties.

What Happens After You File

Processing

Once you file Form 8938 with your tax return, the IRS processes it as part of your complete return. There's no separate acknowledgment or approval for Form 8938—if the IRS accepts your return, your Form 8938 was accepted too.

Extended Statute of Limitations

Filing Form 8938 affects how long the IRS can audit your return. If you fail to file Form 8938 or fail to report required assets, the statute of limitations for your entire tax return remains open for at least three years after you eventually file Form 8938. If you omit more than $5,000 in income related to foreign assets, the IRS has six years (instead of the usual three) to assess additional taxes. IRS.gov

Penalties for Non-Compliance

The penalties for failing to file Form 8938 are substantial:

• Initial penalty: $10,000 for failure to file a complete and correct form
• Continuing penalty: After the IRS notifies you of your failure to file, an additional $10,000 for each 30-day period (or part thereof) that you continue not to file, up to a maximum additional penalty of $50,000
• Accuracy-related penalty: 40% of any tax underpayment attributable to unreported foreign assets
• Fraud penalty: 75% of underpayment due to fraud
• Criminal penalties: Possible in cases of willful violations IRS.gov

Penalty Relief

The IRS may waive penalties if you can demonstrate reasonable cause for your failure to file and show it wasn't due to willful neglect. Each case is evaluated individually based on all facts and circumstances.

No Impact on FBAR

Filing Form 8938 does not relieve you of any FBAR filing requirements. Make sure you've met all your foreign account reporting obligations separately.

FAQs

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

Yes, if you have an interest in a foreign pension or deferred compensation plan and your total specified foreign financial assets exceed the reporting threshold, you must report it on Form 8938. However, foreign social security or equivalent government benefits are not reportable. IRS.gov

Q2: What if I inherited foreign assets or accounts during the year?

If you inherited specified foreign financial assets (like foreign stocks, foreign bank accounts, or interests in foreign entities), they count toward your reporting threshold. Report them on Form 8938 if the total value of all your specified foreign assets exceeds your threshold. The inheritance itself might also require reporting on Form 3520 if it exceeds certain amounts.

Q3: I'm a green card holder living abroad. Do I use the higher thresholds for taxpayers living outside the U.S.?

Yes. If you're a U.S. resident alien (including green card holders) who qualifies as a bona fide resident of a foreign country or meets the physical presence test (330 days abroad), you use the higher thresholds for taxpayers living outside the United States.

Q4: Can I estimate asset values if I don't have exact figures?

Yes. The IRS allows reasonable estimates based on publicly available financial information or other verifiable sources. You don't need to hire professional appraisers. Use periodic account statements for financial accounts. For other assets, use reliable financial websites, financial news sources, or similar resources to determine fair market value. Document how you determined your values in case of future questions.

Q5: What's the difference between maximum value and year-end value?

You must report both. Year-end value is the asset's worth on December 31, 2022. Maximum value is the highest fair market value at any point during 2022. For accounts, review all your monthly statements to find the highest balance. Use the maximum value to determine whether you meet the reporting threshold, and report both values on Form 8938.

Q6: I only had the foreign account for part of the year. Do I still need to report it?

Yes, if at any time during the year your total specified foreign financial assets exceeded the reporting threshold. Even if you closed the account mid-year or it existed for just one day, include it if reporting is required. Report the maximum value during the time you held it and note the dates you held the asset.

Q7: What if my foreign financial institution won't give me the information I need?

Do your best to obtain the required information. Request account statements, year-end summaries, and transaction records. If the institution refuses or cannot provide information, document your efforts and make reasonable estimates based on whatever information you have. Explain the situation in an attached statement. The IRS evaluates compliance efforts in context, and documented good-faith efforts help demonstrate reasonable cause if questions arise later.

For More Information

All information sourced from IRS.gov:

• About Form 8938
• Instructions for Form 8938
• Basic Questions and Answers on Form 8938
• Comparison of Form 8938 and FBAR Requirements
• Do I Need to File Form 8938?
• Penalty Relief for Reasonable Cause