If you’re a U.S. taxpayer with financial relations with foreign countries, it’s important to be aware of your reporting obligations particularly with regard to assets from abroad. A form that can cause confusion is IRS Form 8938. It’s officially known as the Statement of Certain foreign financial assets.
In contrast to that of the FBAR (FinCEN Form 114) which is filed separately, Form 8938 is filed alongside an IRS tax return. It’s a crucial element of FATCA enforcement, which is the Foreign Account Tax Compliance Act.
What exactly is Form 8938? Who needs to fill it out, and how does it differ from FBAR? Let’s look at it in detail.
What Is Form 8938?
Form 8938 was created as one of the U.S. government’s crackdown on tax evasion by offshore entities. It’s used to record “specified foreign financial assets” in cases where their value is greater than certain thresholds.
In contrast to the FBAR, which is submitted to FinCEN, Form 838 is attached to your IRS Form 1040 and included in your tax return for income. The purpose is to give the IRS a clear view of any foreign assets which could generate income or impact your total tax burden.
Who Must File Form 8938?
You must fill out Form 8938 if you:
- You are a defined person (this applies to U.S. citizens, resident aliens subject to the Green Card or substantial presence tests, as well as certain non-resident aliens who choose to be considered U.S. residents).
- You have specified overseas financial investments.
- The value of these assets is greater than thresholds set by the IRS.
Companies like domestic corporations, partnerships as well as trusts can have to file under certain conditions.
Filing Thresholds
The minimum threshold for filing Form 8938 is based on your filing status as well as whether you are within the U.S. or abroad. Here’s a quick summary:
| Filing Status | Living in the U.S. | Living Abroad |
| Single or Married Filing Separately | > $50,000 (end of year) or > $75,000 (any time) | > $200,000 (end of year) or > $300,000 (any time) |
| Married Filing Jointly | > $100,000 (end of year) or > $150,000 (any time) | > $400,000 (end of year) or > $600,000 (any time) |
It’s crucial to look at the total value of all the specified foreign assets when determining if you’re in the range of thresholds.
What Assets Are Reported?
Form 8938 covers an even wider variety of assets than the FBAR. It covers:
- Accounts with foreign banks or brokerages
- Foreign securities or stocks that are that are not kept in a U.S. account
- Foreign mutual funds
- Foreign partnerships, or companies
- Foreign pensions or retirement accounts
- Foreign trusts
- Foreign life insurance with cash value
Note: Foreign real estate itself is not reportable unless it is held through a foreign entity like a corporation or trust, then the entity becomes the reportable asset.
How and When to File?
- Attach Form 8938 to your tax returns (Form 1040, 1041, 1065 or Form 1120).
- You must file your tax return by April 15 or within the extended deadline, in the event that you’ve asked for an extension on filing your taxes.
- Electronic filing is mandatory if you’re filing your tax returns online.
Penalties for Failing to File
The IRS will take FATCA enforcement very seriously. What you can expect when you don’t submit Form 8938 to the IRS:
- Initial penalty of $10,000 for failure to report
- A maximum of $50,000 in additional penalties following IRS notification
- A penalty of 40% on any income that is not reported in connection with the assets that are not disclosed.
- Criminal charges could be a possibility for willful infraction
FBAR in comparison to Form 8938, What’s the difference?
Many taxpayers mistake FBAR as Form 8938 but they are two different forms that serve different purposes. Here’s a quick comparison:
| Feature | FBAR (FinCEN Form 114) | Form 8938 (IRS FATCA) |
| Filed with | FinCEN via BSA e-filing system | IRS (attached to Form 1040) |
| Threshold | $10,000 aggregate across all accounts | $50K–$600K depending on residency & filing status |
| Who Must File | U.S. persons with financial interest or authority | U.S. taxpayers with ownership of assets |
| Signature Authority | Yes | No |
| Types of Assets | Bank/brokerage accounts | Broader asset types including stocks, mutual funds, etc. |
Final Takeaway
If you own foreign assets, you would have to submit both the FBAR and Form 8938. They cannot be interchangeable and a failure to file either could result in grave penalties.
Knowing these rules and remaining on top of the rules is not an exercise in box-checking. It’s a crucial element of responsible financial reporting as taxpayers in the U.S. If you’re unsure, talk to an experienced tax professional who knows the international reporting requirements.
Are you unsure if you have to file Form 8938 or file an FBAR? Reach out Parr & Ibarra CPA.Our trusted tax experts help to stay on the right side of compliance.
