What Form 8938 Is For

Form 8938 is an information return that requires certain U.S. taxpayers to report "specified foreign financial assets" when their total value exceeds specific dollar thresholds. Think of it as the IRS's way of keeping tabs on American-owned wealth held overseas.

What counts as a "specified foreign financial asset"? The form covers two main categories. First, any financial account maintained by a foreign financial institution—this includes foreign bank accounts, brokerage accounts, and similar accounts. Second, certain foreign assets held for investment that aren't in a financial account, such as stock or securities issued by a foreign corporation, interests in foreign partnerships, foreign pension plans, foreign-issued insurance policies with cash value, and financial contracts or instruments with foreign counterparties.

What's NOT reportable? You don't need to report foreign currency held directly (cash in your wallet), foreign real estate owned directly, precious metals or tangible assets like art and collectibles, or accounts at U.S. branches of foreign banks. Additionally, U.S.-based accounts are never reported on Form 8938, even if they hold foreign investments—so your U.S. brokerage account holding foreign stocks doesn't need to be reported here.

Form 8938 is filed with your annual income tax return (Forms 1040, 1040-NR, or others) and serves a different purpose than the separate FinCEN Form 114 (FBAR), though you may need to file both.

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

Regular filing: Form 8938 is due at the same time as your tax return—typically April 15, or October 15 if you file for an extension. You must attach it to your return; you cannot file it separately.

If you forgot to file Form 8938: If you already filed your tax return but realized you should have included Form 8938, you need to file Form 1040-X (Amended U.S. Individual Income Tax Return) with your completed Form 8938 attached. According to the IRS, this is the proper procedure for correcting the omission. Don't wait—file the amended return as soon as you discover the error to minimize potential penalties.

If you filed an incomplete or incorrect Form 8938: Similarly, if you previously filed Form 8938 but provided incomplete or inaccurate information, you should file an amended return using Form 1040-X with a corrected Form 8938.

Important note: If you weren't required to file a U.S. income tax return for the year, you don't need to file Form 8938, regardless of how much your foreign assets are worth. The form only applies to taxpayers who must file a return.

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Key Rules and Thresholds for 2023

Whether you must file Form 8938 depends on three factors: 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):

• Single or married filing separately: File if your assets totaled 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: File if your assets totaled more than $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

You qualify as living abroad if you're a U.S. citizen whose tax home is in a foreign country and you're a bona fide resident there for the entire tax year, or if you're physically present in a foreign country for at least 330 days during a 12-consecutive-month period.

• Single or married filing separately: File if your assets totaled 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: File if your assets totaled 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 closely-held corporations, partnerships, and trusts):

• File if assets totaled more than $50,000 on the last day of the tax year OR more than $75,000 at any time during the year.

Valuation rules

For financial accounts, use periodic account statements to determine maximum value (unless you have reason to believe they're inaccurate). For assets not in accounts, use publicly available information from reliable sources or other verifiable data. You don't need to hire a professional appraiser.

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How to File Form 8938 (Step-by-Step Overview)

Step 1: Determine if you must file.

Calculate the total value of all your specified foreign financial assets. Check both the year-end value and the maximum value at any point during the year. If you exceed the threshold that applies to you, you must file.

Step 2: Gather your documentation.

Collect year-end statements for all foreign financial accounts, documentation showing maximum account values during the year, information about any foreign stocks, bonds, or other assets held outside accounts, and details about foreign partnerships, pensions, or other reportable interests.

Step 3: Complete the form.

Form 8938 has several parts. Part I reports foreign deposit and custodial accounts. Part II covers other foreign assets (stocks, partnerships, etc.). Part III is for summarizing your asset values. Part IV lists any other forms you filed that reported some of these assets (Forms 3520, 5471, 8621, 8865, etc.). If you need more space, copy additional blank pages and attach them.

Step 4: Convert foreign currency.

All values must be reported in U.S. dollars. Use the Treasury Department's year-end exchange rates, available at the Treasury's Fiscal Data website.

Step 5: Attach to your tax return.

Form 8938 must be attached to your income tax return (Form 1040, 1040-NR, etc.). It cannot be filed separately. If you e-file your return, the software will typically allow you to attach Form 8938 electronically.

Special note: If you already reported an asset on another required form (like Form 5471 for ownership in a foreign corporation), you don't need to duplicate that information on Form 8938—but you must identify the other form in Part IV and include the asset's value when determining if you meet the filing threshold.

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Common Mistakes and How to Avoid Them

Mistake #1: Confusing Form 8938 with the FBAR. Many people think filing one form covers both requirements—it doesn't. Form 8938 and FinCEN Form 114 (FBAR) are separate filings with different thresholds, due dates, and filing locations. You may need to file both, and certain accounts may need to be reported on both forms. The FBAR has a lower threshold ($10,000) and is filed separately with FinCEN, not with your tax return.

Mistake #2: Forgetting to report non-account assets. Many taxpayers remember to report foreign bank accounts but forget about foreign stocks held directly, interests in foreign partnerships, or foreign pension plans. If these assets aren't held in a financial account, they still need to be reported separately on Form 8938.

Mistake #3: Not filing when you're just over the threshold. Some taxpayers assume that being slightly over the threshold doesn't matter. If you exceed the applicable threshold—even by $1—you must file and report ALL your specified foreign assets, not just the excess.

Mistake #4: Incorrectly valuing assets. Don't guess at values. For accounts, use actual account statements. For non-account assets, use reliable publicly available information. If you don't know the fair market value of a foreign pension and received no distributions, use zero—but still report the pension.

Mistake #5: Missing the filing entirely. This is the costliest mistake. The penalty for failing to file a complete and correct Form 8938 starts at $10,000, with an additional $10,000 for each 30 days of continued failure after IRS notification, up to a maximum of $60,000. Plus, there's a 40% penalty on any tax underpayment related to unreported assets, and criminal penalties may apply in extreme cases.

How to avoid these mistakes: Keep good records throughout the year, review the IRS instructions carefully, consider consulting a tax professional if you have complex foreign holdings, and when in doubt, file the form—it's better to file unnecessarily than to face penalties for not filing.

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What Happens After You File

Once you've filed Form 8938 with your tax return, it becomes part of your permanent tax record with the IRS. Here's what you should know about the aftermath:

IRS processing: The IRS uses Form 8938 to verify compliance with FATCA reporting requirements. They match the information against third-party reports from foreign financial institutions (which are required to report accounts held by U.S. persons directly to the IRS).

Statute of limitations: Here's a critical point—if you don't file Form 8938 when required, or if you file an incomplete or substantially incorrect form, the IRS gets extra time to audit your return. Normally, the IRS has three years to audit a return, but failure to properly file Form 8938 can extend this period to six years for items related to the unreported foreign assets.

No immediate action needed: In most cases, if you've properly completed Form 8938, you won't hear anything back from the IRS unless they have questions or identify a discrepancy. The form is informational, so it doesn't directly create a tax liability—though it may reveal income that should have been reported.

Keep your records: Maintain copies of your Form 8938 and supporting documentation (account statements, valuation information, etc.) for at least six years. You may need these records if the IRS has questions or if you need to file an amended return.

Annual requirement: Remember that Form 8938 is an annual requirement. If you meet the filing threshold in future years, you'll need to file it again with each year's tax return.

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Frequently Asked Questions

Q1: Do I need to report my foreign "Social Security" benefits?

No. Payments or the right to receive foreign social security, social insurance benefits, or similar foreign government programs are not specified foreign financial assets and don't need to be reported on Form 8938.

Q2: What if I inherit foreign assets during the year?

If you inherit foreign stocks, bonds, or other specified foreign financial assets, you must report them on Form 8938 if their value, combined with your other foreign assets, causes you to exceed the applicable threshold. Include them when calculating both your year-end total and your maximum value during the year.

Q3: Do I need to report my U.S. brokerage account that holds foreign stocks?

No. Financial accounts maintained by U.S. financial institutions are never reported on Form 8938, regardless of what the accounts hold. This includes U.S. mutual funds, IRAs, 401(k) plans, and regular brokerage accounts—even if they invest in foreign securities.

Q4: I have accounts at a U.S. branch of a foreign bank. Are those reportable?

No. Accounts at U.S. branches of foreign banks are treated as U.S. accounts and don't need to be reported on Form 8938. However, accounts at foreign branches of U.S. banks ARE reportable because they're maintained outside the United States.

Q5: How do I value a foreign pension if I don't know its worth and haven't received any distributions?

In this situation, report the pension on Form 8938 but use a value of zero. Also use zero when determining whether you've met the reporting threshold. If you do receive distributions or learn the value later, use that information for future filings.

Q6: Can I file Form 8938 separately from my tax return?

No. Form 8938 must be attached to your annual income tax return. It cannot be filed separately. If you forgot to include it with your original return, you must file an amended return (Form 1040-X) with Form 8938 attached.

Q7: What if I own foreign real estate?

Foreign real estate owned directly doesn't need to be reported on Form 8938. However, if you own foreign real estate through a foreign entity (like a foreign corporation or partnership), your interest in that entity IS reportable, and the real estate's value is considered when determining the value of your interest in the entity.

IRS Source

Final Takeaway: Form 8938 is a critical compliance requirement for U.S. taxpayers with significant foreign financial assets. While the thresholds are relatively high, the penalties for non-compliance are severe. When in doubt, consult the official IRS instructions or seek professional tax advice. The most important thing is to be aware of the requirement and take action if it applies to you.

This guide is based on IRS regulations and guidance effective for the 2023 tax year. For the most current information, always consult IRS.gov or a qualified tax professional.