What Is Form 8938?

Form 8938, Statement of Specified Foreign Financial Assets, is a tax form used by certain U.S. taxpayers to report ownership or interest in specified foreign financial assets. This requirement is part of the Foreign Account Tax Compliance Act (FATCA), enacted in 2010 to improve tax compliance involving foreign financial assets and offshore accounts. The form is filed with the IRS as part of the taxpayer’s annual federal income tax return.

The goal of Form 8938 is to increase transparency regarding foreign assets and reduce tax evasion by U.S. persons holding accounts or other financial assets outside the country. Failure to file the form when required can lead to significant penalties.

Who Must File

Form 8938 must be filed by specified individuals and certain domestic entities that have an interest in foreign financial assets exceeding certain thresholds. A "specified individual" includes U.S. citizens, resident aliens, and certain nonresident aliens who elect to be treated as residents for tax purposes.

The filing thresholds vary depending on the taxpayer’s filing status and whether they live in the United States or abroad:

• Unmarried taxpayers living in the U.S. must file if the total value of specified foreign financial assets is more than $50,000 on the last day of the year or more than $75,000 at any point during the year.
• Married taxpayers filing jointly and living in the U.S. have thresholds of $100,000 (year-end) or $150,000 (any time during the year).
• Taxpayers living abroad face higher thresholds — for example, a single filer must report if the total value exceeds $200,000 at year-end or $300,000 at any point during the year.

Domestic entities, such as certain closely held corporations or partnerships with substantial passive income or assets, may also have to file Form 8938 if they meet specific criteria defined by the IRS.

What Qualifies as a Specified Foreign Financial Asset

Specified foreign financial assets include a broad range of accounts and holdings outside the United States. The term generally refers to:

• Financial accounts maintained by foreign financial institutions (such as bank, brokerage, or retirement accounts)
• Stock or securities issued by non-U.S. persons
• Interests in foreign entities (such as partnerships or corporations)
• Financial instruments or contracts with non-U.S. counterparties (such as foreign-issued bonds or swap agreements)

Assets held in a U.S.-based financial institution, even if they relate to foreign companies, are typically not reportable on Form 8938. Additionally, foreign real estate is not considered a specified financial asset. However, an interest in a foreign entity that holds real estate may be reportable, as it represents an ownership interest in a foreign entity, not just real property.

Differences Between Form 8938 and FBAR

Form 8938 is often confused with FinCEN Form 114, commonly referred to as FBAR (Foreign Bank Account Report). While both forms deal with foreign financial accounts, they are separate reporting requirements with different thresholds, governing laws, and filing authorities.

FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS, and applies to U.S. persons with foreign financial accounts exceeding $10,000 in aggregate at any time during the year. Form 8938, by contrast, is part of the federal income tax return and has higher thresholds for reporting.

Additionally, Form 8938 requires more detailed information about certain assets, such as the type of asset, its value, and whether it generated income during the year.

Reporting Requirements and Filing Process

Form 8938 is attached to the taxpayer’s annual income tax return (Form 1040, 1040-SR, 1041, etc.) and filed by the regular tax deadline, including extensions. The form requires taxpayers to disclose:

• The name and address of the financial institution or issuer
• The type of asset
• The maximum value of each asset during the tax year (converted to U.S. dollars)
• Whether the asset generated income, and if so, what type (interest, dividends, capital gains, etc.)
• The source of the asset (whether owned directly or through an entity)

In cases where assets are jointly owned, additional disclosures are necessary to identify the co-owners and the proportion of ownership.

Penalties for Noncompliance

Failure to file Form 8938 when required can result in a $10,000 penalty. If the taxpayer does not file within 90 days after receiving an IRS notice, additional penalties may apply — up to $50,000 for continued noncompliance.

If underreported foreign financial assets lead to an understatement of income, additional accuracy-related penalties may apply. In more serious cases involving willful failure to report, criminal penalties, including prosecution, may be pursued.

Importantly, filing Form 8938 does not exempt the taxpayer from other foreign reporting requirements, such as FBAR, Form 3520, or Form 5471. Each form serves a different purpose and must be evaluated separately.

The Bottom Line

Form 8938 serves as a critical disclosure mechanism under FATCA to ensure that U.S. taxpayers report foreign financial assets that may otherwise go undetected. Understanding the scope of assets covered, the thresholds for filing, and the interplay with other forms is essential to remain compliant with U.S. tax laws. Ignoring the requirement or underreporting can lead to substantial financial and legal consequences. If there is uncertainty about whether an asset must be reported, taxpayers should consider consulting a qualified tax professional with experience in international reporting.