Form 8938: Statement Of Specified Foreign Financial Assets

Form 8938, officially called the Statement of Specified Foreign Financial Assets, is an Internal Revenue Service (IRS) document used by U.S. taxpayers to report their financial holdings outside the United States. It helps the IRS enforce tax laws related to foreign income and assets.

Who Needs to File Form 8938?

You are generally required to file Form 8938 if you meet all the following conditions:

U.S. Taxpayer: You are a U.S. citizen or resident alien.

Specified Foreign Financial Assets: You have an interest in specified foreign financial assets. This includes:

  1. Foreign bank accounts
  2. Securities held in foreign custody
  3. Financial accounts in foreign countries
  4. Foreign-issued stocks, bonds, or other financial instruments

Threshold Exceeded: The total value of all your specified foreign financial assets exceeds a certain threshold at any time during the tax year or on the last day of the tax year. These thresholds are:

  1. Individual Filers: $50,000 at year-end or $75,000 at any time during the year.
  2. Joint Filers: $400,000 at year-end or $600,000 at any time during the year.
  3. U.S. Expats: $200,000 at year-end or $300,000 at any time during the year.

Exceptions to Filing

You do not need to file Form 8938 if:

A. You do not have to file a federal income tax return for the year, even if your foreign asset value exceeds the thresholds.

B. Your only foreign financial assets are held in accounts maintained by:

  1. A U.S. domestic financial institution
  2. The foreign branch of a U.S. financial institution
  3. The U.S. branch of a foreign financial institution

What Information Do I Need to File Form 8938?

To complete Form 8938, you will need to gather information about your foreign financial assets, including:

  • Description of the asset (e.g., bank account, stocks, bonds)
  • Country where the asset is held
  • Institution holding the asset
  • Maximum value of the asset during the tax year
  • Value of the asset on the last day of the tax year

Penalties for Not Filing:

Failing to file Form 8938 when required can result in significant penalties. These can include:

Information reporting penalty: Up to $10,000 for each year you fail to file, with a maximum penalty of $50,000.

Failure-to-file penalty: Up to 5% of the aggregate value of the foreign financial assets for each month you fail to file, with a maximum penalty of 50% of the aggregate value.

Do I need to file Form 8938 if I already filed an FBAR (Foreign Bank Account Report)?

Yes. Even if you filed an FBAR, you may still need to file Form 8938. FBAR reports only bank accounts, while Form 8938 covers a broader range of foreign financial assets.

What if I have difficulty obtaining the value of my foreign assets?

If you are unable to get the exact value of your foreign assets, you can use a reasonable estimate based on available information. However, be prepared to explain your estimates to the IRS if necessary.