What Form 8938 (2018) Is For
IRS Form 8938 (2018), titled Statement of Specified Foreign Financial Assets, is used by U.S. taxpayers to report foreign financial assets when their total value exceeds certain thresholds. The form was introduced under the Foreign Account Tax Compliance Act (FATCA) to promote economic transparency and prevent tax evasion involving foreign financial institutions.
This form helps the Internal Revenue Service (IRS) verify that taxpayers have properly reported all foreign income on their federal tax returns. It covers foreign financial accounts, foreign bank holdings, and other specified foreign financial assets that could generate taxable income.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions, see our comprehensive guide for Form 8938: Statement of Specified Foreign Financial Assets (2018).
When You’d Use Form 8938
U.S. taxpayers must file Form 8938 when their specified foreign financial assets exceed the reporting threshold for their filing status and residence. This includes U.S. citizens, resident aliens, certain nonresident aliens, and specified domestic entities with foreign financial accounts or other foreign financial assets. Individuals must file Form 8938 with their annual income tax return, not separately. Late or amended filings are required if foreign financial assets were omitted or misrepresented on the original return.
Key Rules or Details for 2018
For the 2018 tax year, reporting thresholds ranged from $50,000 to $600,000, depending on whether the taxpayer was married filing jointly, married filing separately, or living abroad. Individuals must report all foreign financial assets, including bank accounts, brokerage accounts, mutual funds, and foreign corporations, if their total value exceeds these limits.
Foreign real estate owned directly is excluded, but property held through a foreign corporation or partnership qualifies as a specified foreign financial asset. All values must be converted to U.S. dollars using the Treasury’s year-end exchange rate. Compliance ensures accurate disclosure of foreign income and supports financial transparency under the Foreign Account Tax Compliance Act.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for Individual Tax Forms.
Step-by-Step (High Level)
Step 1: Confirm filing obligation
Determine whether the taxpayer is a specified person or a specified domestic entity that must file Form 8938 based on reporting thresholds, filing status, and residence inside or outside the United States.
Step 2: Identify reportable assets
List all specified foreign financial assets, including foreign financial accounts, foreign mutual funds, foreign partnership interests, securities issued by foreign corporations, and other foreign financial assets held through a foreign financial institution.
Step 3: Calculate values in U.S. dollars
Compute both the maximum value and the aggregate value of foreign assets for the tax year in U.S. dollars using the Treasury year-end exchange rate for foreign currency conversions.
Step 4: Gather documentation
Collect statements or records showing ownership and highest values for foreign bank accounts, brokerage accounts, and other reportable foreign assets.
Step 5: Determine threshold status
Compare total asset values to the applicable reporting threshold, based on filing status and whether the residence is inside or outside the United States.
Step 6: Complete the form
List all foreign financial accounts, institutions, and other foreign assets on Form 8938, include their maximum values, and note any assets reported on other IRS forms.
Step 7: Coordinate with other filings
Evaluate whether an FBAR filing is required with the Financial Crimes Enforcement Network through the BSA e-filing system, and ensure information aligns with the Form 8938 statement.
Step 8: Attach and file
Attach Form 8938 to the federal income tax return or to an amended return when correcting a prior omission, and file by the applicable deadline, including extensions.
Step 9: Maintain records
Retain documentation supporting valuations, ownership, and account details for all foreign accounts and other foreign assets for the period recommended by IRS record-keeping guidelines.
Step 10: Monitor after filing
Respond promptly to any IRS correspondence about foreign accounts or other foreign financial assets, and submit a timely amended return if additional reportable assets are identified later.
Common Mistakes and How to Avoid Them
Filing Form 8938 separately from the tax return
Form 8938 must always be attached to a federal tax return or an amended return. Submitting it separately will result in an invalid filing.
Confusing Form 8938 with the FBAR
The FBAR (FinCEN Form 114) is filed electronically through the Financial Crimes Enforcement Network’s BSA e-filing system and focuses on bank and financial accounts. Form 8938, however, covers a broader range of foreign assets and is filed with the IRS.
Using incorrect asset values
Taxpayers must report the maximum value of each foreign financial asset during the year, not just the year-end value. Always convert amounts using the Treasury’s year-end exchange rate.
Omitting assets held by disregarded entities
Foreign assets owned by disregarded entities, such as single-member LLCs, must still be included on Form 8938.
Applying the wrong threshold
Thresholds differ for taxpayers living in the United States and those living abroad. Using the wrong benchmark can result in unnecessary penalties.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
Once Form 8938 is submitted, the IRS compares the information with data from foreign financial institutions to verify accuracy under FATCA agreements. If the IRS identifies discrepancies or missing information, it may request clarification or initiate an audit to verify the accuracy of the information.
Filing Form 8938 does not directly generate additional tax liability. However, if the IRS discovers unreported foreign income, the taxpayer may be liable for additional tax, interest, and penalties. Failing to file Form 8938 or omitting reportable assets can lead to penalties starting at $10,000, with additional fines for continued noncompliance.
FAQs
Who must file Form 8938 for the 2018 tax year?
U.S. citizens, resident aliens, and certain nonresident aliens must file Form 8938 with their annual income tax return if their specified foreign financial assets exceed the reporting threshold based on filing status and residence.
What qualifies as specified foreign financial assets?
Specified foreign financial assets include foreign bank accounts, brokerage accounts, foreign mutual funds, foreign partnership interests, and other foreign financial assets held at foreign financial institutions or through foreign entities located in a foreign country.
Are foreign real estate or foreign stocks reportable on Form 8938?
Directly owned foreign real estate is not reportable; however, shares in a foreign corporation that owns property must be reported. Foreign stocks, bonds, and securities issued by foreign corporations are considered foreign financial assets and must be disclosed.
What happens if a taxpayer fails to file Form 8938?
Failure to file Form 8938 may result in a $10,000 penalty, increasing with continued noncompliance. Additional criminal penalties may apply if the omission involves tax evasion or the intentional concealment of foreign financial assets that are required to be disclosed.
How do foreign mutual funds or retirement accounts affect reporting?
Foreign mutual funds, retirement accounts, and annuity contracts are reportable if they qualify as specified foreign financial assets. Their maximum value and aggregate value during the tax year must be included on the statement of specified foreign financial assets.
What is the difference between Form 8938 and the FBAR?
Form 8938 reports foreign assets to the IRS, while the FBAR is filed with the Financial Crimes Enforcement Network via the BSA e-filing system. Both may be required if a taxpayer holds foreign financial accounts exceeding certain thresholds.
