IRS Form 8938
Published on August 30, 2024
by Aya Takriti, EA
Aya Takriti, an IRS Enrolled Agent with 10 years of expat tax experience, specializes in US tax preparation, tax planning and tax advice for US citizens and Green Card holders living and working in the Middle East.
Table of Contents
What is IRS Form 8938?
US taxpayers use IRS Form 8938 to report foreign financial assets.
If your foreign financial assets surpass specific thresholds, this form must be included with your annual 1040 tax return.
The IRS generally uses Form 8938 to monitor US taxpayers’ foreign financial holdings, including foreign bank accounts, securities, and stakes in foreign entities.
Who is required to file Form 8938?
US citizens and green card holders who hold foreign financial assets above certain limits are required to file Form 8938.
However, these thresholds vary based on your filing status and whether you live in the US or abroad.
Thresholds for Filing:
- Single or Married Filing Separately:
- Living in the US: File if your foreign financial assets exceed US$50,000 at year-end or US$75,000 at any time during the year.
- Living Abroad: File if your foreign financial assets exceed US$200,000 at year-end or US$300,000 at any time during the year.
- Married Filing Jointly:
- Living in the US: File if your foreign financial assets exceed US$100,000 at year-end or US$150,000 at any time during the year.
- Living Abroad: File if your foreign financial assets exceed US$400,000 at year-end or US$600,000 at any time during the year.
What types of foreign assets need to be reported?
You must report a variety of foreign financial assets on Form 8938, including:
- Foreign bank accounts
- Foreign brokerage accounts
- Foreign stocks and securities
- Interests in foreign partnerships
- Foreign mutual funds
- Foreign life insurance or annuity contracts with cash value
I want to know more about US taxes abroad
Are there any penalties for failing to file Form 8938?
Yes, not filing Form 8938 can lead to severe penalties.
The IRS may impose a US$10,000 fine for failing to disclose required information, with an additional US$10,000 penalty for every 30 days of non-filing after notification, up to a maximum of US$60,000.
Criminal penalties may also apply in certain cases.
How does Form 8938 differ from FBAR (FinCEN 114)?
Form 8938 and FBAR (FinCEN 114) serve different purposes:
- Form 8938: Filed with your tax return and reports foreign financial assets if the total value exceeds the thresholds.
- FBAR/FinCEN 114: Filed separately from your tax return and reports foreign bank and financial accounts if their total value exceeds US$10,000 at any point during the year.
What should be included on Form 8938?
When completing Form 8938, you need to report the following assets:
- Foreign bank accounts: Include checking, savings, and deposit accounts held at foreign financial institutions.
- Foreign brokerage accounts: Report accounts holding foreign stocks, bonds, or other securities.
- Foreign stocks and securities: Report direct ownership of foreign stocks and bonds that aren’t in a brokerage account.
- Foreign partnership interests: Include ownership stakes in foreign partnerships.
- Foreign mutual funds: Report ownership in foreign mutual funds.
- Foreign life insurance or annuity contracts: Include contracts with cash value issued by foreign insurers.
- Foreign trusts and estates: Report beneficial interests in foreign trusts or estates.
Can you file Form 8938 electronically with your tax return?
Yes, Form 8938 can be submitted electronically along with your tax return. When filing your annual tax return (Form 1040 or Form 1040-SR) through the IRS e-file system, you can include Form 8938 in your electronic submission.
Do Form 8938 and FBAR require reporting the same accounts?
Yes, if you are required to file both Form 8938 and the FBAR (FinCEN Form 114), you must include the same accounts on both forms, provided they meet each form’s specific reporting criteria.
Are there situations where you don’t need to file Form 8938?
Yes, there are exceptions to the filing requirement for Form 8938:
- No Income Tax Return Filing: If you aren’t required to file a US income tax return for the year, you don’t need to file Form 8938, even if your foreign financial assets exceed the reporting threshold.
- Assets Already Reported: If you’ve already reported certain foreign assets on other forms (like Form 3520 or Form 5471), you can simply note those forms on Form 8938 without repeating the detailed information.
- Excluded Assets: Certain assets, such as directly owned foreign real estate, foreign currency, and precious metals, are not required to be reported on Form 8938.
How do you determine the value of foreign financial assets for Form 8938?
- Identify Foreign Financial Assets: List all assets that qualify as specified foreign financial assets.
- Determine Maximum Value: For each asset, calculate the highest value it reached during the tax year, including any income generated from the asset.
- Estimate Values if Necessary: If exact figures aren’t available, use reasonable estimates based on reliable sources like bank statements.
- Convert to US Dollars: Convert the value of each asset to US dollars using the Treasury Department’s exchange rates as of December 31st of the tax year.
Example: If your foreign account had a maximum value of €50,000, you would convert that amount to US dollars using the year-end exchange rate. - Total Asset Values: Add together the values of all specified foreign financial assets to see if they meet or exceed the reporting thresholds.
- Complete Form 8938: Report the total value of your specified foreign financial assets on Form 8938 and file it with your annual tax return (Form 1040 or Form 1040-SR).
