Form 8938 Filing Requirements for Foreign Financial Assets
Form 8938 is used by certain U.S. taxpayers to report specified foreign financial assets when their total value exceeds the applicable filing threshold. The threshold depends on filing status and whether the taxpayer lives in the United States or abroad.
Egan Tax helps U.S. taxpayers determine whether Form 8938 applies, identify which foreign assets must be reported, coordinate Form 8938 with FBAR and other international filings, and address prior-year or late-filing issues.
Who Needs to File Form 8938?
Form 8938 generally applies to specified individuals and certain specified domestic entities that have an interest in specified foreign financial assets above the applicable reporting threshold. For individuals, the threshold depends on filing status and whether the taxpayer lives in the United States or abroad.
U.S. Citizens and Resident Aliens
U.S. citizens and resident aliens may need to file Form 8938 when the total value of their specified foreign financial assets exceeds the threshold that applies to their filing status and residence.
Certain Nonresident Aliens
Some nonresident aliens can also be treated as specified individuals for Form 8938 purposes, including certain individuals who elect to be treated as U.S. residents for income-tax purposes, as well as bona fide residents of Puerto Rico or American Samoa in applicable circumstances.
Certain Domestic Entities
Form 8938 can also apply to certain closely held domestic corporations, partnerships, and trusts that meet the definition of a specified domestic entity and hold specified foreign financial assets above the applicable threshold.
An Income Tax Return Is Generally Required
Form 8938 is attached to the taxpayer’s annual income tax return. If an individual is not required to file an income tax return for the year, Form 8938 generally is not required solely because foreign financial assets exceed the reporting threshold.
Form 8938 Filing Thresholds
Form 8938 filing thresholds depend on filing status and whether the taxpayer is treated as living in the United States or abroad. The test looks at both the total value of specified foreign financial assets on the last day of the tax year and the highest total value reached at any time during the year.
Meeting a dollar threshold does not by itself determine whether Form 8938 must be filed. The taxpayer must also have an interest in assets that qualify as specified foreign financial assets and generally must have an income tax return filing requirement.
What Does “Living Abroad” Mean for Form 8938?
The higher foreign-residence thresholds generally apply when the taxpayer’s tax home is in a foreign country and the applicable presence-abroad requirements are met, such as qualifying as a bona fide resident of a foreign country or meeting the 330-day physical presence test.
What Counts as a Specified Foreign Financial Asset?
Form 8938 does not apply to every asset located outside the United States. The reporting rules focus on specified foreign financial assets, which can include foreign financial accounts as well as certain investments, ownership interests, and financial contracts held outside a financial account.
Foreign Financial Accounts
Financial accounts maintained by a foreign financial institution can be specified foreign financial assets.
- foreign bank accounts
- foreign brokerage or custodial accounts
- certain foreign retirement or pension accounts
- certain foreign cash-value insurance or annuity contracts
Foreign Stocks and Securities
Stock or securities issued by a non-U.S. person can be reportable when held for investment outside an account maintained by a financial institution.
- shares of a foreign corporation
- foreign-issued bonds
- notes or debentures issued by a foreign person
- other qualifying foreign securities
Interests in Foreign Entities
An ownership or other qualifying interest in a foreign entity can be a specified foreign financial asset.
- interests in foreign corporations
- interests in foreign partnerships
- certain interests in foreign trusts
- certain interests in foreign estates
Foreign Financial Instruments and Contracts
Certain financial instruments or contracts can also be reportable when the issuer or counterparty is not a U.S. person.
- foreign-issued debt instruments
- certain swaps
- options and derivatives
- other qualifying financial contracts with foreign counterparties
Foreign Real Estate Is Different
Directly owned foreign real estate, such as a personal residence or rental property, is generally not itself reported on Form 8938. However, if the property is owned through a foreign corporation, partnership, trust, or other foreign entity, the taxpayer’s interest in that entity may be a specified foreign financial asset.
Whether an asset is reportable and whether its value must be included when testing the Form 8938 filing threshold are separate questions. The complete foreign-asset picture should be reviewed before concluding that Form 8938 is not required.
Assets Reported on Certain Other International Forms
Some specified foreign financial assets may already be reported on another international information return. Assets reported on Form 3520, Form 5471, Form 8865, or Form 8621 generally do not need to be listed again in detail on Form 8938.
Instead, the taxpayer generally identifies in Part IV of Form 8938 which of those forms were filed. The related form still has its own filing requirements, so this avoids duplicating the detailed asset information rather than replacing the underlying reporting obligation.
Common Situations That Can Trigger Form 8938
Form 8938 questions often begin with several foreign accounts, investments, or ownership interests rather than one obvious reportable asset. The filing analysis depends on what the taxpayer owns, how the asset is held, its value, and whether the total specified foreign financial assets exceed the applicable threshold.
You Keep Money or Investments in a Foreign Account
A bank, savings, brokerage, custodial, or other qualifying financial account maintained by a foreign financial institution can be a specified foreign financial asset.
The account can be relevant to Form 8938 even when the investments held inside it include U.S. stocks or other U.S.-issued assets.
You Have a Foreign Pension or Retirement Plan
An interest in certain foreign pension, retirement, or deferred-compensation arrangements can be reportable for Form 8938 purposes when the applicable filing threshold is exceeded.
The fact that an arrangement is treated as a retirement plan in another country does not automatically remove it from the Form 8938 analysis.
You Hold Foreign Shares or Securities Directly
Stock, bonds, notes, or other securities issued by a foreign person can be specified foreign financial assets when they are held for investment outside a financial account.
Direct ownership should therefore be reviewed separately from investments already held inside a financial account.
You Own an Interest in a Foreign Company or Partnership
An ownership interest in a foreign corporation or foreign partnership can be a specified foreign financial asset.
Related international forms, such as Form 5471 or Form 8865, may also need to be considered depending on the ownership structure and applicable reporting rules.
You Have an Interest in a Foreign Trust or Estate
Certain interests in foreign trusts or foreign estates can be specified foreign financial assets.
Foreign trust situations may also involve Form 3520 or Form 3520-A, so the reporting should be reviewed across the applicable international forms rather than one form in isolation.
You Have Several Foreign Assets Below the Threshold Individually
A taxpayer may have several smaller foreign accounts or investments that do not appear significant when viewed separately.
For individuals, the Form 8938 threshold generally looks at the aggregate value of specified foreign financial assets, so multiple holdings can create a filing requirement when considered together.
Form 8938 is not simply a foreign-bank-account form. The analysis can extend to foreign accounts, pensions, securities, entity interests, trusts, estates, and other qualifying financial assets.
When and How Is Form 8938 Filed?
Form 8938 is generally filed as part of the taxpayer’s annual federal return rather than as a separate filing. The filing deadline therefore follows the due date of the return to which Form 8938 is attached, including applicable extensions.
For an individual taxpayer, Form 8938 is generally attached to the applicable federal income tax return, such as Form 1040, Form 1040-SR, or Form 1040-NR.
Form 8938 is due when the annual return is due. If a valid extension applies to the annual return, the Form 8938 filing deadline generally follows that extended due date.
Form 8938 generally should not be mailed or submitted to the IRS by itself. It is filed with the annual return or, where appropriate, with an amended return.
The Applicable Tax Year Matters
Form 8938 identifies the calendar year or tax year being reported. The taxpayer should review the specified foreign financial assets held during that year, determine the applicable filing threshold, and report the required information for the assets in which the taxpayer had an interest.
Different Types of Taxpayers Can File Form 8938
Although Form 8938 is commonly associated with individual income tax returns, certain specified domestic entities can also have a filing requirement. The annual return to which Form 8938 is attached therefore depends on the type of taxpayer involved.
Form 8938 is different from the FBAR filing process. Form 8938 accompanies the federal return, while the FBAR is filed separately through FinCEN when its independent filing requirements are met.
What Happens If Form 8938 Is Late, Incomplete, or Not Filed?
Form 8938 has its own information-reporting penalties, and additional consequences can arise when an undisclosed foreign financial asset is connected with unreported taxable income. The potential result therefore depends on what was omitted, whether the IRS has already contacted the taxpayer, and whether the underlying tax return was also incorrect.
$10,000 Failure-to-File Penalty
If a taxpayer is required to file Form 8938 but does not file a complete and correct form by the due date, including applicable extensions, an initial $10,000 penalty may apply.
Continued Failure After IRS Notice
If a complete and correct Form 8938 is not filed within 90 days after the IRS mails a notice of the failure, an additional $10,000 penalty may apply for each 30-day period, or part of a period, that the failure continues after the 90-day period expires.
The maximum additional penalty for continuing failure is $50,000.
40% Accuracy-Related Penalty
If an underpayment of tax results from a transaction involving an undisclosed specified foreign financial asset, a penalty equal to 40% of the related underpayment may apply.
This is different from the Form 8938 failure-to-file penalty because it relates to the tax underpayment associated with the undisclosed asset.
The Assessment Period Can Stay Open Longer
If Form 8938 is not filed, or a required specified foreign financial asset is omitted, the period for assessing tax for the year may remain open for all or part of the return until three years after the required Form 8938 information is provided.
A separate six-year assessment period can also apply when more than $5,000 of gross income attributable to one or more specified foreign financial assets is omitted from the tax return.
A late Form 8938 does not automatically mean every possible penalty applies. The filing history, assets involved, related income reporting, IRS contact, and reasons for the failure should be reviewed before determining the potential consequences.
Can Reasonable Cause Help With a Form 8938 Penalty?
A Form 8938 penalty is not necessarily automatic in every late, incomplete, or missing filing situation. The IRS provides a reasonable-cause exception when the taxpayer can affirmatively show that the failure was due to reasonable cause and not willful neglect.
Reasonable Cause Depends on the Facts
There is no standard explanation that guarantees penalty relief. The IRS determines reasonable cause on a case-by-case basis after considering the relevant facts and circumstances surrounding the failure.
The analysis can include what the taxpayer knew about the filing requirement, the complexity of the foreign assets involved, what steps were taken to comply, when the reporting problem was discovered, and how quickly corrective action was taken.
The Taxpayer Must Support the Claim
A taxpayer relying on reasonable cause should be prepared to explain and document the circumstances that led to the missed or incomplete Form 8938. The IRS instructions require the taxpayer to affirmatively show the facts supporting the reasonable-cause position.
Foreign Disclosure Restrictions Are Not Enough by Themselves
The IRS specifically states that the fact a foreign jurisdiction could impose a civil or criminal penalty for disclosing information does not, by itself, constitute reasonable cause for failing to report a specified foreign financial asset on Form 8938.
A reasonable-cause claim should be based on the taxpayer’s actual facts and supporting records rather than a generic statement. A late Form 8938 should therefore be reviewed before assuming either that a penalty definitely applies or that relief will automatically be granted.
What If Form 8938 Was Missed in a Prior Year?
A missed Form 8938 should be reviewed in the context of the taxpayer’s full filing history rather than treated as an isolated late form. The appropriate correction path depends on which years are affected, whether foreign income was also omitted, whether other international forms or FBARs were missed, and whether the IRS has already contacted the taxpayer.
Identify the Years and Assets Involved
Start by determining which tax years required Form 8938, which specified foreign financial assets should have been reported, and whether the applicable filing thresholds were exceeded for each year.
Check for Related International Reporting
A missed Form 8938 can overlap with other U.S. international reporting requirements. Depending on the taxpayer’s assets and ownership interests, the review may also involve the FBAR, Form 5471, Form 3520, Form 8621, or other international information returns.
Correct the Prior-Year Filing
Taxpayers who need to file a delinquent Form 8938 and who are not already under IRS civil examination or criminal investigation, and have not been contacted about the delinquent information return, generally correct the issue through the applicable amended-return filing procedures.
Consider Whether Reasonable Cause Applies
If a penalty issue arises, the taxpayer’s facts should be reviewed to determine whether a reasonable-cause position may be available. Any explanation should reflect the actual circumstances surrounding the missed filing rather than a generic statement.
When Streamlined Procedures May Be Relevant
If the missing Form 8938 is part of broader non-willful offshore compliance failures involving foreign income, foreign financial assets, other international information returns, or FBARs, the Streamlined Filing Compliance Procedures may need to be considered instead of correcting Form 8938 in isolation.
IRS Contact Changes the Available Options
The correction strategy can change if the IRS has already begun an examination, initiated a criminal investigation, or contacted the taxpayer regarding the delinquent reporting. The filing history and any IRS correspondence should therefore be reviewed before choosing a correction path.
A missed Form 8938 is best treated as a broader filing-history and foreign-asset reporting question, not simply as a form that needs to be filed late.
How Egan Tax Helps With Form 8938
Form 8938 reporting is often less about completing one form and more about understanding the taxpayer’s complete foreign-asset picture. Egan Tax can help determine whether the filing requirement applies, identify which assets should be reported, coordinate overlapping international forms, and address prior-year compliance issues.
Form 8938 Filing Requirement Review
Egan Tax can review filing status, residence, foreign financial assets, and applicable thresholds to determine whether Form 8938 is required and which assets should be included.
Foreign Asset Reporting
Reporting can be coordinated across foreign accounts, pensions, investments, entity interests, trusts, estates, and other specified foreign financial assets so the filing reflects the taxpayer’s actual holdings.
Form 8938 and FBAR Coordination
Some foreign accounts can create obligations under both Form 8938 and the FBAR. Egan Tax can review the requirements independently so one filing is not incorrectly treated as a substitute for the other.
Related International Forms
Foreign assets can overlap with other international reporting such as Form 5471, Form 3520, Form 8621, or other information returns. These obligations can be reviewed together rather than one form at a time.
Prior-Year and Late Filing Review
If Form 8938 was missed or filed incompletely, Egan Tax can review the filing history, related foreign income and reporting, IRS contact, and potential correction options, including whether the Streamlined Filing Compliance Procedures may be relevant.
Direct CPA Guidance
Clients work directly with Bill Egan, CPA on Form 8938 and related U.S. international tax matters, including foreign financial assets, offshore reporting, and prior-year compliance.
Need Help With Form 8938?
If you are unsure whether Form 8938 applies, which foreign assets should be reported, or how to correct a prior-year filing issue, Egan Tax can review your situation directly.
What Records Help With a Form 8938 Review?
Form 8938 reporting depends on both the type of foreign asset and its value during the year. Gathering the underlying account, ownership, and valuation records before preparing the form makes it easier to determine which assets are reportable, whether the filing threshold was exceeded, and whether related international forms also need to be reviewed.
Foreign Account and Asset Records
- foreign bank and brokerage statements
- account numbers and financial institution details
- foreign pension or retirement-plan statements
- foreign insurance or annuity records where applicable
- documents for directly held foreign stocks, bonds, or securities
- foreign trust or estate statements
- ownership records for foreign corporations or partnerships
Value and Threshold Information
- year-end value of each specified foreign financial asset
- highest value reached during the tax year
- foreign-currency values and applicable exchange-rate information
- purchase, contribution, or acquisition records
- documents supporting ownership percentages
- statements showing when an account or asset was opened, acquired, sold, or closed
Prior U.S. Tax and Reporting Records
- federal income tax returns for the relevant years
- prior Forms 8938
- FBAR filings and supporting account records
- Forms 5471 where foreign-company ownership is involved
- Forms 3520 where foreign trusts or certain foreign transfers are involved
- Form 8621 or other international information returns where applicable
- IRS notices, correspondence, amended returns, or prior reasonable-cause submissions
Why Complete Records Matter
The same foreign holding can affect several U.S. reporting systems at once. Complete records help determine not only whether Form 8938 is required, but also whether the same account, entity interest, trust, or investment needs to be considered for another international information return or the FBAR.
Frequently Asked Questions About Form 8938
Form 8938 rules depend on the taxpayer, filing status, residence, types of foreign financial assets involved, and their aggregate value. These answers cover some of the most common questions about the filing requirement.
What Is Form 8938?
Form 8938, Statement of Specified Foreign Financial Assets, is an IRS information return used by certain U.S. taxpayers to report specified foreign financial assets when their total value exceeds the applicable reporting threshold.
The form is part of the taxpayer’s annual federal return and is separate from the FBAR reporting system.
Who Needs to File Form 8938?
Form 8938 can apply to specified individuals, including U.S. citizens, resident aliens, and certain nonresident aliens, as well as certain specified domestic corporations, partnerships, and trusts.
The taxpayer must generally have an interest in specified foreign financial assets whose aggregate value exceeds the applicable threshold. If an individual is not required to file an income tax return for the year, Form 8938 generally is not required solely because the foreign assets exceed the threshold.
What Are the Form 8938 Filing Thresholds?
For an unmarried taxpayer or married taxpayer filing separately who lives in the United States, the threshold is generally more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year.
For married taxpayers filing jointly and living in the United States, the corresponding amounts are generally $100,000 and $150,000.
Higher thresholds apply to qualifying taxpayers living abroad: generally $200,000/$300,000 for taxpayers not filing jointly and $400,000/$600,000 for taxpayers filing jointly.
See the Form 8938 filing threshold table above for the full comparison.
What Counts as a Specified Foreign Financial Asset?
Specified foreign financial assets can include accounts maintained by foreign financial institutions, foreign stocks and securities held outside financial accounts, interests in foreign entities, certain foreign pensions, interests in foreign trusts or estates, and qualifying financial instruments or contracts with foreign issuers or counterparties.
See What Counts as a Specified Foreign Financial Asset? for a more detailed breakdown.
Does Foreign Real Estate Have to Be Reported on Form 8938?
Directly owned foreign real estate, such as a personal residence or rental property, generally is not itself a specified foreign financial asset reported on Form 8938.
However, if the real estate is owned through a foreign corporation, partnership, trust, estate, or other foreign entity, the taxpayer’s interest in that entity may be reportable when the Form 8938 requirements are otherwise met.
Do Foreign Pensions or Retirement Accounts Go on Form 8938?
An interest in a foreign pension plan or foreign deferred-compensation plan can be a specified foreign financial asset and may need to be reported when the taxpayer exceeds the applicable Form 8938 filing threshold.
The fact that an arrangement is treated as a retirement plan under foreign law does not automatically exclude it from Form 8938 reporting.
What Is the Difference Between Form 8938 and the FBAR?
Form 8938 and the FBAR are separate reporting regimes. Form 8938 is filed with the federal tax return and can cover a broader range of specified foreign financial assets. The FBAR is filed separately with FinCEN and focuses on foreign financial accounts.
They also use different filing thresholds and rules. See the full Form 8938 vs. FBAR comparison above or review Egan Tax’s FBAR guidance.
Can I Be Required to File Both Form 8938 and an FBAR?
Yes. A foreign financial account can potentially be reportable under both systems when the taxpayer independently meets the requirements for each.
Filing Form 8938 does not replace an FBAR, and filing an FBAR does not replace Form 8938.
Is Form 8938 Filed Separately From My Tax Return?
No. Form 8938 is generally attached to the taxpayer’s annual federal return. The IRS instructions state that Form 8938 should not normally be sent to the IRS by itself unless it is attached to an annual return or amended return.
When Is Form 8938 Due?
Form 8938 is generally due on the same date as the annual return to which it is attached. If a valid extension applies to that return, the Form 8938 deadline generally follows the extended filing deadline.
What Is the Penalty for Not Filing Form 8938?
A taxpayer who is required to file Form 8938 but fails to file a complete and correct form may face an initial $10,000 penalty.
If the failure continues for more than 90 days after the IRS mails a notice, additional $10,000 continuation penalties can apply for each 30-day period, subject to a maximum additional penalty of $50,000.
Other consequences can also apply when undisclosed foreign financial assets are connected with an underpayment of tax. See the Form 8938 penalties section above.
Can Reasonable Cause Help With a Form 8938 Penalty?
Potentially. The IRS provides that the Form 8938 failure-to-file penalty will not be imposed when the taxpayer affirmatively shows that the failure was due to reasonable cause and not willful neglect.
Reasonable cause depends on the taxpayer’s particular facts and circumstances and should not be assumed merely because the filing failure was unintentional.
What Should I Do If I Missed Form 8938 in a Prior Year?
First determine which years and foreign assets were affected and whether foreign income, FBARs, or other international information returns were also missed.
Depending on the facts, a delinquent Form 8938 may need to be submitted with an amended return. If the problem is part of broader non-willful offshore compliance failures, the Streamlined Filing Compliance Procedures may also need to be considered.
Review the full prior-year Form 8938 section above before treating the issue as an isolated late form.
Form 8938 Reporting Reviewed By An Experienced CPA
Form 8938 can involve foreign financial accounts, pensions, investments, ownership interests, trusts, estates, overlapping FBAR requirements, prior-year filings, and significant penalties. Professional review helps ensure the filing reflects the taxpayer’s actual foreign-asset picture and the correct U.S. reporting requirements.
Clients work directly with Bill Egan, CPA on Form 8938 and related U.S. international tax matters.
Discuss Your Form 8938 Filing