What Form 8938 Is For

Form 8938, Statement of Specified Foreign Financial Assets, is an IRS information reporting form that U.S. taxpayers use to report ownership of certain foreign financial assets when their total value exceeds specific thresholds. Created under the Foreign Account Tax Compliance Act (FATCA), this form helps the IRS track foreign holdings to ensure proper tax compliance.

The form requires detailed information about foreign bank accounts, foreign stocks and securities held outside financial accounts, interests in foreign partnerships and trusts, foreign pension plans, and financial contracts with foreign counterparties. Simply put, if you're a U.S. taxpayer with substantial foreign financial assets, Form 8938 tells the IRS what you own overseas and how much it's worth. IRS.gov

It's important to note that Form 8938 is not a substitute for the FBAR (FinCEN Form 114). If you meet the requirements for both forms, you must file both—they serve different purposes and have different filing requirements. IRS.gov

When You’d Use Form 8938

Regular Filing

Form 8938 must be attached to your annual income tax return (Forms 1040, 1040-NR, or applicable business returns) and filed by the same due date, including extensions. For the 2017 tax year, this meant April 15, 2018 (or October 15, 2018 with an extension). IRS.gov

Late or Amended Filing

If you failed to file Form 8938 with your original return, you must file an amended return. For individuals, this means filing Form 1040-X (Amended U.S. Individual Income Tax Return) with Form 8938 attached. The IRS explicitly states that you should not send Form 8938 separately—it must accompany a tax return or amended return. IRS.gov

Even if your foreign assets didn't generate taxable income, you still must report them if you exceed the thresholds. Many taxpayers mistakenly believe that non-income-producing assets don't need to be reported, but the law requires reporting based on asset value, not tax consequences.

Key Rules or Details for 2017

Who Must File

You must file Form 8938 if you're a "specified person" (U.S. citizen, resident alien, certain nonresident aliens, or specific domestic entities) with an interest in specified foreign financial assets exceeding applicable thresholds.

Reporting Thresholds for Individuals Living in the United States

• Unmarried: 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 OR more than $150,000 at any time during the year
• Married filing separately: More than $50,000 on the last day OR more than $75,000 at any time during the year

Reporting Thresholds for Individuals Living Abroad (qualifying under bona fide residence or physical presence tests)

• Unmarried: More than $200,000 on the last day OR more than $300,000 at any time during the year
• Married filing jointly: More than $400,000 on the last day OR more than $600,000 at any time during the year
• Married filing separately: More than $200,000 on the last day OR more than $300,000 at any time during the year

Specified Domestic Entities

Specified Domestic Entities: Closely held domestic corporations and partnerships meeting certain passive income/asset tests must file if total foreign asset value exceeds $50,000 on the last day of the tax year or $75,000 at any time during the year. IRS.gov

What Qualifies as a Specified Foreign Financial Asset

• Financial accounts at foreign financial institutions (banks, investment accounts, etc.)
• Foreign stocks or securities not held in financial accounts
• Interests in foreign partnerships, trusts, or estates
• Foreign pension plans and deferred compensation plans
• Financial contracts with foreign counterparties (swaps, options, derivatives)

What's NOT Reportable

What's NOT Reportable: Direct holdings of foreign currency, foreign real estate held directly (not through an entity), precious metals, art, collectibles, and accounts at U.S. financial institutions (including foreign stock held in U.S.-based accounts). IRS.gov

Step-by-Step (High Level)

Step 1: Determine If You Must File

Calculate the maximum value of all your specified foreign financial assets during 2017. Include the entire value of jointly owned assets (unless filing jointly with your spouse, in which case include it once). If your total exceeds your applicable threshold, you must file.

Step 2: Gather Documentation

Collect year-end account statements, periodic statements throughout the year, and documentation showing the maximum value of each asset during 2017. For assets denominated in foreign currencies, you'll need to convert values to U.S. dollars using the Treasury's foreign currency exchange rates.

Step 3: Complete the Form

Form 8938 has multiple parts:

Part I: Report foreign deposit and custodial accounts
Part II: Report other foreign assets (stocks, partnership interests, etc.)
Part III: Summary information
Part IV: Excepted assets already reported on other forms (Forms 3520, 5471, 8621, 8865, etc.)

For each asset, provide identifying information (account numbers, issuer names, addresses), the maximum value during the year, and tax reporting information.

Step 4: Attach to Your Tax Return

Attach the completed Form 8938 to your Form 1040 or other applicable return. If you have more assets than fit on one form, copy the relevant parts and attach additional sheets.

Step 5: File by the Deadline

Submit your return with Form 8938 attached by the due date, including any extensions you've obtained. IRS.gov

Common Mistakes and How to Avoid Them

Mistake 1: Not Filing Because Assets Didn't Generate Income

Many taxpayers incorrectly assume that if foreign assets produced no taxable income, they don't need to report them. Solution: Remember that Form 8938 is based on asset value, not income. If you exceed the threshold, you must file regardless of whether the assets affected your tax liability.

Mistake 2: Incorrect Valuation of Jointly Owned Assets

The rules for jointly owned assets are complex and depend on who you own them with. Solution: If filing jointly with your spouse, report jointly owned assets once at full value. If filing separately from your spouse, report half the value of jointly owned assets. If you jointly own assets with someone other than your spouse, each owner reports the entire value.

Mistake 3: Not Counting Assets for Threshold Calculations

Some taxpayers exclude assets already reported on other forms when calculating whether they meet the filing threshold. Solution: Include ALL specified foreign financial assets when determining if you meet the threshold, even if they're reported elsewhere. Only after determining you must file can you use Part IV to identify assets reported on other forms.

Mistake 4: Using Incorrect Currency Conversion Rates or Dates

Foreign assets must be valued in U.S. dollars using proper exchange rates. Solution: Use the U.S. Treasury Bureau of the Fiscal Service exchange rate as of the last day of the tax year, even for assets sold earlier. For financial accounts, you may rely on the conversion rate shown on year-end statements.

Mistake 5: Thinking Form 8938 Replaces the FBAR

Form 8938 and the FBAR (FinCEN Form 114) are separate requirements with different thresholds and rules. Solution: Determine your obligations for each form independently. Many taxpayers must file both forms, and certain accounts may need to be reported on both. IRS.gov

Mistake 6: Failing to Report Maximum Value During the Year

Some taxpayers only report year-end values. Solution: You must report the maximum value the asset reached at any time during the year, not just its December 31 value. Review periodic statements throughout the year to determine this amount.

What Happens After You File

Immediate Processing: Once filed with your return, Form 8938 becomes part of your tax record. The IRS processes the information as part of your overall return.

Compliance Verification: The IRS may match Form 8938 data against information received from foreign financial institutions under FATCA reporting requirements. Discrepancies may trigger inquiries or audits.

Statute of Limitations Impact: Filing Form 8938 affects how long the IRS can audit your return. If you fail to file a required Form 8938, the statute of limitations for your entire tax return may remain open for three years after you eventually file the form. If you omit more than $5,000 in gross income related to foreign assets, the IRS has six years to assess additional tax. IRS.gov

No Immediate Tax Consequences: Form 8938 itself is informational and doesn't directly result in additional tax. However, it may reveal unreported income or help the IRS identify discrepancies that lead to tax adjustments.

Ongoing Obligation: Filing Form 8938 one year doesn't end your obligation. You must evaluate your filing requirement each subsequent tax year based on that year's asset values and thresholds.

FAQs

1. Do I need to file Form 8938 if I'm not required to file a tax return?

No. If you're not required to file an income tax return for the year, you don't need to file Form 8938, even if your foreign assets exceed the reporting thresholds. IRS.gov

2. What are the penalties for not filing Form 8938?

The initial penalty is $10,000 for failure to file a complete and correct form by the due date. If you don't respond to IRS notices within 90 days, an additional $10,000 penalty applies for each 30-day period of continued failure, up to a maximum additional $50,000. If you underpay tax due to an undisclosed foreign asset, a 40% accuracy-related penalty may apply. Criminal penalties are possible in cases of willful violation. IRS.gov

3. Do I report my foreign rental property on Form 8938?

Foreign real estate held directly is not a specified foreign financial asset and doesn't need to be reported. However, if you hold the property through a foreign corporation, partnership, or trust, your interest in that entity must be reported if you exceed the applicable thresholds. IRS.gov

4. How do I value foreign pension plans for Form 8938?

Use the fair market value of your interest on the last day of the tax year if known. If you don't know the fair market value based on readily accessible information, use the value of any distributions you received during the year. If you received no distributions and don't know the value, report zero. IRS.gov

5. Are accounts at U.S. branches of foreign banks reportable?

No. Financial accounts maintained by a U.S. branch of a foreign financial institution are not considered specified foreign financial assets and don't need to be reported on Form 8938. IRS.gov

6. Can I avoid penalties if I had a reasonable explanation for not filing?

Yes. No penalty will be imposed if you can show that your failure to file was due to reasonable cause and not willful neglect. You must affirmatively establish the facts constituting reasonable cause. IRS.gov

7. If I already reported my foreign accounts on other IRS forms, do I still need Form 8938?

It depends. If all your specified foreign financial assets are timely reported on Forms 3520, 3520-A, 5471, 8621, or 8865, you only need to complete Part IV of Form 8938 (identifying those other forms) rather than duplicating the detailed information. However, you still must determine whether you meet the filing threshold by including all assets, and you must attach Form 8938 to your return. IRS.gov

For More Information

For More Information: Visit IRS.gov/Form8938 or consult the complete instructions at IRS.gov.