Form 8938 Checklist: 2017 Tax Year
Purpose of Form 8938
Form 8938 reports foreign financial assets when total values exceed reporting thresholds under Internal Revenue Code Section 6038D for citizens, resident aliens, nonresident aliens, and domestic entities. These filers must disclose qualifying foreign financial assets on their annual income tax return for the 2017 tax year, when applicable filing thresholds are met. The Foreign Account Tax Compliance Act requires disclosure of foreign bank accounts, foreign financial accounts, ownership interests in foreign entities, foreign securities, and similar offshore holdings.
Form 8938 is attached to Form 1040 or other income tax returns and applies to individuals, domestic corporations, partnerships, and trusts holding substantial foreign assets. It operates separately from FinCEN Form 114, also known as the FBAR, which is filed with the Financial Crimes Enforcement Network and focuses primarily on foreign bank and financial accounts. Although the requirement began for tax years after March 18, 2010, the 2017 tax year may require Form 8938 amendments or delinquent submission procedures for some taxpayers.
Step-by-Step Filing Checklist
Step 1: Determine Filer Status and Reporting Threshold
The first step is to confirm whether the filer qualifies as a specified individual or a specified domestic entity. Specified individuals generally include U.S. citizens, resident aliens, and certain nonresident aliens treated as residents for tax purposes. Specified domestic entities include closely held domestic corporations, partnerships, and trusts with substantial foreign ownership or beneficiaries.
For 2017, unmarried taxpayers living in the United States were required to file Form 8938 if specified foreign financial assets exceeded fifty thousand dollars on the last day of the year or seventy-five thousand dollars at any time during the year. Married taxpayers filing jointly faced thresholds of $100,000 at the end of the year or $150,000 at any point during the year.
Step 2: Identify Foreign Deposit and Custodial Accounts for Part V
All foreign deposit and custodial accounts, including savings, checking, time deposits, and accounts holding foreign securities, must be identified. Accounts maintained at foreign financial institutions or foreign branches of U.S. institutions are included, even if no income was generated during the year.
For each account reported in Part V, the filer must indicate whether the account was opened or closed during the year, whether it was jointly owned, and whether it produced any reportable income. Accurate determination of maximum account value during the year is essential for proper reporting.
Step 3: Summarize Deposit and Custodial Accounts in Part I
After completing Part V, totals must be summarized in Part I. This includes the total number of foreign deposit accounts, the aggregate maximum value of those accounts, the number of custodial accounts, and their combined maximum value.
Part I also requires confirmation of whether any foreign deposit or custodial accounts were closed during the 2017 tax year. This summary allows the Internal Revenue Service to evaluate whether reporting thresholds were applied correctly.
Step 4: Report Other Foreign Assets in Part VI
Foreign assets not held in deposit or custodial accounts must be reported separately. These assets include foreign stock held directly, foreign partnership interests, foreign mutual funds, foreign hedge fund interests, foreign notes, and interests in foreign trusts or estates.
Each asset must be described clearly, including identifying numbers when available, and categorized based on its maximum value during the tax year. Acquisitions and dispositions during 2017 must also be disclosed in this section.
Step 5: Complete Part II Summary for Other Foreign Assets
Part II summarizes all other foreign assets reported in Part VI. The filer must enter the total number of assets and their combined maximum value during the year. This section also requires confirmation of whether any foreign assets were acquired or sold during the tax year.
The summary ensures that non-account foreign holdings are fully disclosed and aligned with the valuation requirements under Section 6038D.
Step 6: Document Currency Conversion and Exchange Rates
When foreign accounts or assets are denominated in non-U.S. currencies, values must be converted to U.S. dollars. Parts V and VI ask whether foreign currency exchange rates were used and, if so, require disclosure of the currency, exchange rate, and source.
Treasury Department exchange rates are generally required unless an official rate exists for a specific currency. If another publicly available rate is used, the source must be identified to support the conversion methodology.
Step 7: Reconcile Tax Items in Part III
Part III reconciles income and tax items related to reported foreign assets with amounts shown on the income tax return. This includes interest, dividends, capital gains, royalties, deductions, and credits attributable to foreign assets.
Amounts must be matched to the appropriate IRS forms and line numbers, such as Form 1040, Schedule B, Schedule D, or Form 8949. This reconciliation helps ensure consistency between Form 8938 disclosures and reported taxable income.
Step 8: List Excepted Assets in Part IV
Certain foreign assets reported on other IRS forms are excepted from duplicate reporting on Form 8938. Part IV requires disclosure of the number of forms that already report these assets.
Forms commonly listed include Form 3520, Form 3520-A, Form 5471, Form 8621, and Form 8865. While detailed asset information may be excluded, these assets still count toward determining whether filing thresholds are met.
Step 9: Provide Foreign Entity Information in Part VI
When reporting ownership interests in foreign entities, additional identifying information is required. This includes the entity’s name, type, and mailing address. The Global Intermediary Identification Number field is optional and may be left blank even if known.
For foreign assets that are not entity interests, issuer or counterparty information must be provided, including whether the issuer is a U.S. or foreign person.
Step 10: Attach Continuation Statements When Necessary
If multiple accounts or assets exist within the same category, continuation statements must be attached using the format provided with Form 8938. The filer must indicate the number of continuation pages and ensure each asset is fully documented.
Each continuation statement must be completed consistently and include all required lines to meet documentation standards under IRC Section 6038D.
Additional Important Notes
The Global Intermediary Identification Number fields on Form 8938 are optional and not required for compliance with Internal Revenue Code Section 6038D reporting rules for covered taxpayers. Married taxpayers filing jointly count jointly owned specified foreign financial assets only once when determining Form 8938 filing thresholds, while married taxpayers filing separately generally allocate one-half of the values. Specified domestic entities face lower reporting thresholds than individuals and must carefully evaluate compliance obligations, while certain assets are excluded from Form 8938 reporting under federal rules.
Excluded assets include foreign real estate held directly, accounts maintained at U.S. financial institutions, even when denominated in a foreign currency, and foreign government social security-type benefits. Foreign pension plans, foreign retirement accounts, foreign deferred compensation plans, and foreign life insurance contracts with cash value are specified foreign financial assets when thresholds are met. Failure to file Form 8938 may result in substantial penalties; therefore, taxpayers with prior omissions should consider disclosure options, as well as guidance from Publication 519 and Publication 570, for compliance purposes.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
