IRS Form 8938: Who Needs to File It?

If you are a U.S. taxpayer with overseas financial assets, you may be required to file IRS Form 8938. Introduced under the Foreign Account Tax Compliance Act (FATCA), this form is a way for the IRS to track specified foreign financial assets and ensure compliance with U.S. tax laws. Many taxpayers get confused between Form 8938 and other foreign reporting requirements like the FBAR, but the two serve different purposes.

In this article, we’ll break down Form 8938 in simple language so you can understand what it is, who must file it, how to complete it step-by-step, the reporting thresholds, and the potential penalties for non-compliance.

Table of Contents

What is Form 8938?

Form 8938, officially titled “Statement of Specified Foreign Financial Assets”, is used by certain U.S. taxpayers to report their foreign financial assets to the IRS.

This form was introduced in 2010 under FATCA. Its goal is to increase transparency and reduce tax evasion by requiring U.S. taxpayers to disclose their foreign financial holdings if they meet certain thresholds.

Unlike FBAR (FinCEN Form 114), which is filed with the Financial Crimes Enforcement Network, Form 8938 is filed directly with your annual federal income tax return (Form 1040).

Who Needs to File Form 8938?

Not every taxpayer with a foreign bank account has to file Form 8938. The requirement depends on your filing status, residency, and the total value of your foreign financial assets.

You must file Form 8938 if:

You are a U.S. citizen, resident alien, or certain non-resident aliens who elect to be treated as residents for tax purposes.
You own specified foreign financial assets that exceed the IRS reporting thresholds.

General Reporting Thresholds:

Single taxpayers (living in the U.S.): $50,000 on the last day of the tax year, or $75,000 at any point during the year.
Married taxpayers filing jointly (living in the U.S.): $100,000 on the last day of the year, or $150,000 at any point.
Single taxpayers abroad: $200,000 on the last day, or $300,000 anytime during the year.
Married taxpayers filing jointly abroad: $400,000 on the last day, or $600,000 anytime during the year.

If your foreign assets exceed these limits, you must attach Form 8938 to your tax return.

Step-by-Step Guide to Completing Form 8938

Filing Form 8938 may seem overwhelming at first, but breaking it down section by section helps. Below is a simplified step-by-step approach.

Preparation

Before filling out the form, gather:

Bank statements from foreign accounts
Documentation of ownership in foreign entities
Details of foreign pension plans, trusts, or securities
Exchange rates to convert balances into U.S. dollars (use the IRS year-end rates)

Section 1 – Identifying Information (Lines 1-4)

Enter your name, Social Security Number (SSN), and address.
This section confirms the taxpayer filing the report.

Section 2 – Summary of Foreign Deposit and Custodial Accounts (Lines 5-9)

Provide the total number of foreign accounts.
Report the maximum value of each account during the tax year.

Section 3 – Summary of Other Foreign Assets (Lines 10-12)

Report assets such as stocks, securities, interests in foreign partnerships, or trusts.
Provide totals for the maximum value.

Section 4 – Summary of Tax Items Attributable to Specified Foreign Financial Assets

Indicate if any foreign asset produced income such as dividends, interest, royalties, or capital gains.

Section 5 – Excepted Specified Foreign Financial Assets

Identify any assets not required to be reported (e.g., assets reported on other IRS forms such as 3520 or 5471).

Section 6 – Detailed Information for Each Foreign Deposit and Custodial Account (Lines 20-28)

Provide details like the bank name, account number, maximum value, and whether the account generated income.

Section 7 – Detailed Information for Each Other Foreign Asset (Lines 29-36)

List other assets such as stocks, bonds, or ownership in entities.
Provide detailed information, including maximum value, income, and ownership percentage.

Detailed Reporting Thresholds

The IRS sets thresholds to determine who must file. These thresholds depend on:

Filing status (single, married filing jointly, married filing separately).
Residency (U.S. resident or living abroad).

For example, a single taxpayer living in the U.S. with $80,000 in foreign assets at any point during the year must file Form 8938. However, if the assets total only $40,000, they are exempt.

Reporting Requirements on Form 8938

The following details must be reported:

Type of asset (bank account, stock, security, etc.)
Account or asset number
Maximum value during the year
Whether income was generated
Country where the asset is held

The IRS requires accurate reporting to prevent under-disclosure.

What Assets Need to be Reported?

Not all foreign holdings are reportable, but most financial assets fall under Form 8938’s scope.

Foreign Bank Accounts

Checking, savings, and investment accounts held abroad.

Foreign Securities

Stocks, bonds, and mutual funds issued by foreign corporations.

Foreign Pension Plans and Trusts

Retirement accounts or trusts established in a foreign country.

Other reportable assets include:

Foreign partnership interests
Foreign-issued life insurance with cash value
Foreign hedge funds and private equity funds

FBAR vs. Form 8938: Understanding the Differences

Many taxpayers confuse FBAR and Form 8938 because both deal with foreign accounts.

Feature	Form 8938	FBAR (FinCEN 114)
Filed with	IRS (attached to tax return)	FinCEN (Treasury Department)
Threshold	$50,000+ (varies by status/residency)	$10,000 aggregate at any point
Assets Reported	Broader (bank accounts, securities, pensions, trusts)	Only financial accounts
Due Date	With tax return (April 15, with extension to Oct 15)	April 15 (automatic extension to Oct 15)
Penalties	Up to $10,000+	Up to $10,000+ (higher for willful violations)

Taxpayers may need to file both if the requirements are met.

Potential Penalties for Non-Compliance

The IRS enforces strict penalties for failing to file Form 8938.

Failure to File: $10,000 per form.
Continued Failure: Additional $10,000 for each 30 days after IRS notice, up to $50,000.
Accuracy-Related Penalty: 40% of any underreported income related to undisclosed assets.
Criminal Penalties: In severe cases, prosecution for tax evasion.

Compliance is always safer than risking heavy fines.

Conclusion

IRS Form 8938 is a crucial reporting requirement for U.S. taxpayers with specified foreign financial assets. Whether you hold foreign bank accounts, securities, or pension plans, knowing your reporting thresholds and obligations helps you avoid costly penalties.

If your foreign financial assets exceed the reporting limits, you must file Form 8938 with your tax return. Remember that this form is separate from FBAR, and in many cases, taxpayers must file both.

When in doubt, consult a qualified tax professional to ensure compliance with IRS rules and avoid unnecessary legal or financial troubles.