Yes, you must file IRS Form 8938 if the total value of your specified foreign financial assets exceeds the reporting threshold that applies to your filing status and residence on the last day of the tax year, or at any time during the year. This form is the Statement of Specified Foreign Financial Assets, and it lives at the heart of the Foreign Account Tax Compliance Act, commonly called FATCA, which Congress passed as part of the HIRE Act of 2010.
The problem is real and the consequences sting. The IRS reports that more than 9 million U.S. taxpayers live abroad and millions more hold foreign accounts, yet a baseline penalty of $10,000 attaches to each missed Form 8938, with continuation penalties pushing the total to $60,000 per year, plus a 40% accuracy-related penalty on undisclosed income under IRC §6662(j).
Here is what you will learn in this guide:
- 📋 How to read every line of Form 8938 and pick the right boxes for each account type
- 💰 The exact dollar thresholds that trigger filing for single filers, joint filers, and Americans abroad
- 🌍 The differences between Form 8938 and the FinCEN Form 114 (FBAR) so you do not double-report or miss one
- ⚖️ The penalties, statute of limitations traps, and Tax Court rulings that shape enforcement under IRC §6038D
- 🧾 Three named-person scenarios that walk through real numbers, real currencies, and real choices
What Form 8938 Is and Why It Exists
Form 8938 is an annual information return that attaches to your federal income tax return and tells the IRS about your foreign financial assets. Congress created it through Section 511 of the HIRE Act, which added Internal Revenue Code §6038D to the tax code in March 2010. The goal is to close the offshore tax gap by forcing both U.S. taxpayers and foreign banks to disclose the same accounts, so the IRS can match them.
The form does not calculate tax on its own. It is purely informational, but ignoring it is dangerous because the final regulations under Treas. Reg. §1.6038D-1 carry sharp teeth. The plain-English idea is simple: if you own foreign accounts or foreign securities above set dollar limits, you must list them by name, number, and value on Form 8938.
The consequence of skipping the form is a $10,000 minimum penalty under IRC §6038D(d), plus continuation penalties of $10,000 per 30 days up to $50,000 more after IRS notice. The statute of limitations for your entire tax return also stays open for six years under IRC §6501(e)(1)(A)(ii) when you omit more than $5,000 of income tied to a foreign asset.
A common misconception is that filing the FBAR with FinCEN replaces Form 8938. It does not. The FBAR goes to the Treasury Department, while Form 8938 goes to the IRS, and the two forms cover overlapping but distinct asset classes.
Who Created and Who Enforces the Form
The IRS designed Form 8938 in coordination with the Treasury Department after FATCA passed. The Large Business and International Division of the IRS leads enforcement, with help from the Criminal Investigation unit when fraud is suspected.
Foreign banks also play a role because FATCA requires them to report U.S. account holders to the IRS through intergovernmental agreements. When a foreign bank reports a U.S. citizen but the citizen does not file Form 8938, the mismatch becomes an automatic audit flag.
The consequence of this matching system is harsh. The IRS knows about your account before you file, so omitting it raises both civil and criminal exposure under IRC §7201 for tax evasion and IRC §7206 for false statements.
Who Must File Form 8938
You must file Form 8938 if you are a specified person and the value of your specified foreign financial assets exceeds the threshold that matches your filing status and residence. The IRS lists these rules in the official Form 8938 instructions.
A specified person includes any U.S. citizen, any resident alien for any part of the tax year, certain nonresident aliens who elect to be treated as residents, and specified domestic entities under Treas. Reg. §1.6038D-6. The 2016 final regulations expanded the rule to closely held domestic corporations, partnerships, and trusts that are formed or used to hold foreign financial assets.
The consequence of being a specified person without filing is the $10,000 baseline penalty, plus a presumption under IRC §6038D(e) that any foreign asset you fail to disclose has enough value to trigger the threshold.
A common mistake is assuming that holding the asset through a foreign entity removes the duty to file. It does not. If you have an interest in a foreign trust, foreign partnership, or foreign corporation, the underlying account still flows up to your personal Form 8938 in many cases.
The Reporting Thresholds Explained
The thresholds depend on whether you live in the United States or abroad and on your filing status. The form uses two tests for each category: the end-of-year test and the any-time-during-the-year test. You file if you fail either test.
| Filing Status and Residence | End-of-Year Threshold | Any-Time Threshold |
|---|---|---|
| Unmarried, living in U.S. | More than $50,000 | More than $75,000 |
| Married filing jointly, U.S. | More than $100,000 | More than $150,000 |
| Married filing separately, U.S. | More than $50,000 | More than $75,000 |
| Unmarried, living abroad | More than $200,000 | More than $300,000 |
| Married filing jointly, abroad | More than $400,000 | More than $600,000 |
| Married filing separately, abroad | More than $200,000 | More than $300,000 |
| Specified domestic entity | More than $50,000 | More than $75,000 |
To qualify as living abroad, you must meet the bona fide residence or physical presence test under IRC §911(d). The consequence of misjudging your residence is using the wrong threshold and missing a required filing.
A common misconception is that the threshold applies per account. It does not. The threshold applies to the total value of all specified foreign financial assets combined.
What Counts as a Specified Foreign Financial Asset
A specified foreign financial asset is either a financial account held at a foreign financial institution or other foreign financial assets held for investment outside a U.S. account. The IRS comparison chart lays out the categories in detail.
Reportable items include foreign bank accounts, foreign brokerage accounts, foreign mutual funds, foreign hedge fund interests, foreign private equity interests, foreign pensions and deferred compensation plans, foreign life insurance with cash value, foreign annuities, and stock or bonds issued by a non-U.S. person held outside a financial account. The plain-English rule is that almost anything financial that sits outside the United States counts.
The consequence of misclassifying an asset is a missed entry, which the IRS treats as a failure to file under IRC §6038D(d). Even one missed account on a filed Form 8938 can trigger the $10,000 penalty.
A common mistake is treating foreign real estate as reportable. Direct ownership of foreign real estate is not reportable, but if you hold the real estate through a foreign entity, your interest in that entity is reportable.
Items You Do Not Report
You do not report assets held in U.S. branches of foreign banks, U.S. mutual funds that invest abroad, or accounts at U.S. brokerages even if they hold foreign stocks. You also skip foreign currency held personally, precious metals held directly, and personal-use foreign property.
Social security-type benefits paid by a foreign government are also excluded. The Form 8938 instructions list these exceptions in clear language.
The consequence of overreporting is wasted time and possible privacy exposure, but no penalty. Still, accuracy matters because the IRS uses Form 8938 entries to cross-check Form 1040, Schedule B, Form 8621 for PFICs, Form 3520 for foreign trusts, and Form 5471 for foreign corporations.
Step-by-Step: How to Fill Out Form 8938
Form 8938 has six parts plus a top identification block. You attach it to your Form 1040, Form 1041, Form 1065, or Form 1120 by the original or extended due date. The form for the 2025 tax year is filed during the 2026 filing season.
The plain-English approach is to first gather every year-end statement, convert each balance to U.S. dollars using the Treasury year-end exchange rate, and then sort assets into deposit and custodial accounts versus other asset types. The consequence of using a wrong rate is an inaccurate maximum value, which the IRS may treat as a substantial omission.
A real-world example helps. Maria, a U.S. citizen living in Berlin, holds a Deutsche Bank checking account, a German brokerage account at Comdirect, and a small interest in a German GmbH. She converts each balance from euros to dollars using the December 31, 2025 Treasury rate, then enters them on the form.
A common misconception is that you can use any commercial exchange rate. You cannot. The IRS instructs filers to use the Treasury rate unless none is published, in which case you may use another publicly available rate and disclose the source.
Top of the Form: Identification
Enter your name exactly as it appears on your tax return, your taxpayer identification number, and the type of filer. The filer types are individual, partnership, corporation, or trust, and you check only one box.
If you are filing an amended Form 8938, check the amended return box. If this is the first year you have a duty to file, you do not check any continuation box. The plain-English rule is to match every identifier on Form 8938 to your underlying return.
The consequence of mismatched names or TINs is a processing delay, a CP-2000 notice, or a misapplied penalty. James, a dual citizen of the U.S. and Canada, learned this when his middle initial differed between his Form 1040 and his Form 8938, triggering a six-month IRS correspondence loop.
Part I: Foreign Deposit and Custodial Accounts Summary
Part I gives a top-line count and total value of two categories: deposit accounts and custodial accounts. A deposit account is a checking, savings, time deposit, or similar account at a foreign bank. A custodial account holds securities for your benefit at a foreign brokerage.
You enter the number of deposit accounts, the maximum total value of all deposit accounts during the year, and then the same two figures for custodial accounts. You also check a box if any account was closed during the year.
The consequence of a missing closed-account box is suspicion that you hid the account, which the IRS may treat as willful under the Bedrosian line of cases. The plain-English fix is to always check the closed-account box when it applies.
Part II: Other Foreign Assets Summary
Part II covers everything that is not a deposit or custodial account. Examples include direct ownership of foreign stock, foreign partnership interests, and foreign pension rights. You enter the number of such assets, the maximum aggregate value, and a closed-or-disposed indicator.
The consequence of skipping Part II for a foreign pension is harsh because foreign pensions often grow tax-deferred under foreign law but not under U.S. law. Priya, a U.S. green-card holder from India, faced a $10,000 penalty when she left her Indian Provident Fund off Part II, even though her FBAR included it.
A common misconception is that a foreign pension is exempt because it is retirement-related. It is not exempt. Almost every foreign pension that is not a U.S.-qualified plan must appear on Part II.
Part III: Tax Items Attributable to Specified Foreign Financial Assets
Part III is a cross-reference grid. You list the interest, dividends, royalties, other income, gains, deductions, and credits that flow from the foreign assets, and you tell the IRS which form and line each amount appears on.
The form has columns for Form 1040 Schedule B for interest and dividends, Schedule D for capital gains, Form 8621 for PFICs, and Form 1116 for the foreign tax credit. The plain-English point is that the IRS wants to make sure every dollar of foreign income shows up somewhere taxable.
The consequence of leaving Part III blank when the assets generated income is a 40% accuracy-related penalty under IRC §6662(j) plus the failure-to-file penalty.
Part IV: Excepted Specified Foreign Financial Assets
Part IV is a relief section. You do not re-list assets that you already reported on Form 3520, Form 3520-A, Form 5471, Form 8621, or Form 8865. You enter how many of each form you filed and you skip those assets in Parts V and VI.
The plain-English rule is report once, not twice. The consequence of duplicate reporting is not penalty exposure, but it can confuse the IRS computer match and raise audit risk.
A common mistake is forgetting to file the underlying form, which means the asset is not actually excepted. If you owe Form 8621 for a PFIC and never filed it, you must list the PFIC on Form 8938.
Part V: Detailed Information for Each Foreign Deposit and Custodial Account
Part V is where the heavy lifting happens. For every foreign deposit and custodial account, you list the type, account number, whether it was opened or closed during the year, whether it was jointly owned with a spouse, whether the account was a no-value account, and the maximum value during the year.
You also report the foreign currency, the exchange rate used, and the source of the rate. You then list the name and full mailing address of the foreign financial institution.
The consequence of an incomplete Part V is a per-account penalty exposure. David, a software engineer in Seattle with a UBS account in Zurich, missed the SWIFT code and address line, and the IRS issued a CP15 notice for a $10,000 penalty.
Part VI: Detailed Information for Each Other Foreign Asset
Part VI covers everything from Part II in detail. For each asset, you describe it, list the date acquired and disposed if applicable, the maximum value, the exchange rate, and identifying information for the issuer or counterparty. If the asset is stock of a foreign corporation, you list the corporation’s name, address, and whether it is publicly traded.
The plain-English rule is one row per asset. The consequence of grouping multiple assets into a single row is that the IRS treats the entry as defective.
A common misconception is that you can attach a separate spreadsheet instead of filling in Part VI. The instructions allow continuation sheets in the same format, but a freeform spreadsheet is not acceptable.
Three Real-World Scenarios
These scenarios show how Form 8938 plays out in practice. Each row maps a real action to its real consequence, so you can spot your own situation.
Scenario 1: U.S. Expat With a Foreign Bank Account
| Filing Action | Filing Consequence |
|---|---|
| Maria, single, lives in Berlin, holds €180,000 across two Deutsche Bank accounts | She files Form 8938 because $200,000+ year-end test is borderline; she still files because mid-year peak hit $310,000 |
| She uses December 31, 2025 Treasury rate of 0.93 EUR/USD to convert | The IRS accepts her conversion and her values match the bank’s FATCA report |
| She also files the FBAR with FinCEN | She avoids the $10,000 FinCEN civil penalty under 31 U.S.C. §5321 |
Scenario 2: Domestic Investor With Foreign Mutual Funds
| Filing Action | Filing Consequence |
|---|---|
| David, married filing jointly, lives in Seattle, holds $120,000 in a UK-domiciled mutual fund | He files Form 8938 because the $100,000 MFJ threshold is exceeded |
| He treats the fund as a PFIC and files Form 8621 | He lists the fund in Part IV as an excepted asset and skips Part VI |
| He elects the mark-to-market method under IRC §1296 | He avoids the punitive excess distribution regime and reports gains annually |
Scenario 3: Dual-Citizen Retiree With a Foreign Pension
| Filing Action | Filing Consequence |
|---|---|
| Priya, U.S.-India dual citizen, lives in New Jersey, holds a $90,000 Indian Provident Fund | She files Form 8938 because she crosses the $50,000 unmarried U.S. threshold |
| She lists the Provident Fund in Part II and Part VI as a foreign pension | She avoids the $10,000 IRC §6038D(d) penalty |
| She also evaluates whether the fund is a foreign grantor trust | If yes, she files Form 3520 and Form 3520-A and lists them in Part IV |
Mistakes to Avoid
Filing errors drive most Form 8938 penalties. Here are the most damaging mistakes and the consequence of each.
- Skipping the form because you filed the FBAR. The two forms are separate, and missing Form 8938 brings a $10,000 IRS penalty under IRC §6038D(d).
- Using a wrong exchange rate. Anything other than the Treasury reporting rate without disclosure can trigger an inaccurate-value finding.
- Reporting only the year-end balance. The any-time-during-the-year test catches mid-year peaks and missing the peak value triggers a defective filing.
- Forgetting closed accounts. Accounts closed during the year still need full reporting in Part V or Part VI.
- Missing a foreign pension. Foreign pensions almost always count and leaving one off invites a per-asset penalty.
- Listing assets in both Part IV and Parts V or VI. Duplicate reporting confuses IRS matching and may raise audit risk.
- Filing Form 8938 standalone. The form must attach to a tax return; mailing it alone means it never enters the IRS system.
Penalties for Failure to File or Inaccuracy
The penalty structure under IRC §6038D is layered. The base penalty for failure to file is $10,000. After the IRS sends a notice, an additional $10,000 applies for each 30-day period of continued failure, up to a $50,000 cap.
The plain-English picture is that one missed Form 8938 can cost up to $60,000 in failure-to-file penalties alone. The consequence is even worse if the omission also caused you to underreport income, because IRC §6662(j) tacks on a 40% accuracy-related penalty on the undisclosed-asset portion of the underpayment.
Criminal penalties apply under IRC §7201 for tax evasion, with up to five years of prison and a $250,000 fine for individuals. False statements on Form 8938 can also bring IRC §7206 perjury charges, with up to three years of prison.
A common misconception is that reasonable cause is easy to prove. It is not. The taxpayer must show by a preponderance of evidence that the failure was due to reasonable cause and not willful neglect, and Treas. Reg. §1.6038D-8(e) makes clear that foreign jurisdiction non-disclosure laws are not reasonable cause.
Statute of Limitations Extensions
Failing to file Form 8938 keeps your entire tax return open for assessment for six years under IRC §6501(e)(1)(A)(ii) instead of the normal three. If you omit more than $5,000 of income from a foreign asset, the six-year window applies automatically.
If you fail to file Form 8938 entirely, IRC §6501(c)(8) keeps the statute open until three years after you file the missing form. The consequence is that the IRS can audit very old years if you never come into compliance.
A common mistake is assuming a quiet disclosure fixes the problem. Quiet disclosures do not stop the running of penalties and may actually raise willfulness exposure. The IRS Voluntary Disclosure Practice is the safer path.
Form 8938 vs. FBAR: Side-by-Side
Form 8938 and the FBAR overlap, but they are not duplicates. The FBAR is FinCEN Form 114 and goes to the Treasury Department under the Bank Secrecy Act. Form 8938 goes to the IRS under FATCA.
| Feature | Form 8938 | FBAR (FinCEN 114) |
|---|---|---|
| Authority | IRC §6038D | 31 U.S.C. §5314 |
| Threshold | $50,000 to $600,000 by status | $10,000 aggregate |
| Filed With | IRS, attached to Form 1040 | FinCEN, electronically |
| Due Date | Tax return due date plus extensions | April 15 with automatic extension to October 15 |
| Civil Penalty | $10,000 plus continuation up to $50,000 | $10,000 non-willful, greater of $100,000 or 50% of balance for willful |
| Asset Scope | Financial accounts plus other foreign assets | Financial accounts only |
| Real Estate | Direct holding excluded | Direct holding excluded |
The plain-English point is that most filers must file both forms. The consequence of filing only one is exposure to the other agency’s penalty regime.
Do’s and Don’ts
These rules will save you money and stress. Each one comes with a specific reason rooted in the regulations.
- Do file by the original or extended due date because untimely filing triggers the IRC §6038D(d) penalty.
- Do keep records for at least six years because IRC §6501(e) extends the audit window that long.
- Do match every Form 8938 entry to Schedule B, Schedule D, and Form 1116 because Part III is a cross-check.
- Do use the Treasury year-end rate because it is the IRS-preferred source under the Form 8938 instructions.
-
Do file Form 8938 even if you owe no tax because the duty is informational, not income-based.
-
Don’t skip the FBAR thinking Form 8938 covers it because the agencies are different.
- Don’t rely on foreign secrecy laws because Treas. Reg. §1.6038D-8(e) rejects them as reasonable cause.
- Don’t group multiple accounts into one Part V row because each account needs its own line.
- Don’t ignore foreign pensions because they almost always count under the regulations.
- Don’t quiet-disclose old years because that path raises willfulness risk.
Pros and Cons of Filing Voluntarily Before an IRS Notice
If you have missed past Form 8938 filings, voluntary action almost always beats waiting. Here are the main upsides and downsides.
- Pro: You can use streamlined filing compliance procedures and pay zero or 5% miscellaneous offshore penalty rather than full §6038D penalties.
- Pro: Voluntary disclosure stops continuation penalties from accruing because the form is filed.
- Pro: Filing late but accurately preserves reasonable-cause arguments because you show good faith.
- Pro: You start the IRC §6501(c)(8) statute of limitations clock by filing the missing form.
-
Pro: You reduce criminal exposure under IRC §7201 because evasion requires willfulness.
-
Con: You may pay a 5% Title 26 miscellaneous offshore penalty under streamlined domestic procedures.
- Con: Filing reveals income that may carry tax, interest, and accuracy penalties.
- Con: Streamlined procedures require certifying non-willfulness, which carries perjury risk under IRC §7206.
- Con: Once filed, the IRS may open an audit on related years even if not on your radar.
- Con: Professional fees for an experienced international tax attorney often exceed $10,000 for complex cases.
Key Court Rulings That Shape Form 8938 Practice
Although Form 8938 is relatively new, several rulings shape its enforcement. United States v. Toth, 33 F.4th 1 (1st Cir. 2022), upheld a willful FBAR penalty of more than $2 million and signaled that courts will not soften foreign-asset penalties based on the Eighth Amendment. The Supreme Court denied certiorari in Toth v. United States, leaving the ruling intact.
Bittner v. United States, 598 U.S. 85 (2023), held that the non-willful FBAR penalty applies per report, not per account, which lowered exposure for many filers. Although Bittner concerns the FBAR, courts often look to it when interpreting non-willful conduct under §6038D. The plain-English takeaway is that courts care about the structure of the penalty, not just the dollar size.
Flume v. Commissioner, T.C. Memo. 2017-21, addressed willfulness in foreign-asset reporting and rejected the taxpayer’s claim of inadvertence. The consequence of these rulings is that willfulness is easy for the IRS to show through bank records, foreign address use, and signed tax returns that ignored Schedule B disclosure questions.
A common misconception is that Bittner eliminated stacking penalties for Form 8938. It did not. Bittner only addressed the FBAR, and IRC §6038D continues to allow per-form continuation penalties.
State-Level Considerations
Form 8938 is a federal information return and no state requires its own version. However, many states piggyback on federal taxable income, so omitted foreign income flows through to state returns and creates state-level underpayments.
California, New York, and New Jersey are aggressive on residency audits and often request copies of federal Form 8938 to identify income they believe should be sourced to the state. The plain-English consequence is that a missed Form 8938 can trigger a state audit even though the form itself is federal.
A common mistake is assuming that moving abroad cuts state tax ties. Most states require affirmative steps to break domicile, and California in particular uses FTB Publication 1031 to evaluate residency. The consequence of incomplete domicile changes is full state tax on foreign income, plus matching penalties.
Frequently Asked Questions
Do I file Form 8938 if I already file the FBAR?
Yes. The FBAR goes to FinCEN under the Bank Secrecy Act, while Form 8938 goes to the IRS under FATCA. Both can apply to the same accounts and you must file each one separately if you meet its threshold.
Is direct foreign real estate reportable on Form 8938?
No. Direct ownership of foreign real estate is not a specified foreign financial asset. However, if you hold the real estate through a foreign corporation, partnership, or trust, your interest in that entity must be reported.
Does Form 8938 apply to nonresident aliens?
No. Nonresident aliens generally do not file Form 8938 unless they elect to be treated as U.S. residents for the entire year under IRC §6013(g) or §6013(h), or they are bona fide residents of certain U.S. territories.
Are foreign retirement accounts reportable?
Yes. Foreign pensions, deferred compensation plans, and provident funds are specified foreign financial assets in almost every case, and you must list them on Part II and Part VI of Form 8938.
Can I file Form 8938 separately from my tax return?
No. Form 8938 must attach to Form 1040, Form 1041, Form 1065, or Form 1120. A standalone filing is not accepted by the IRS and does not start the statute of limitations clock.
Is the penalty for failing to file really $10,000?
Yes. IRC §6038D(d) imposes a $10,000 baseline penalty, plus $10,000 per 30-day period after IRS notice up to a $50,000 cap, for a maximum of $60,000 per year per missed form.
Does Form 8938 apply to U.S. partnerships and corporations?
Yes. Specified domestic entities, including closely held corporations, partnerships, and trusts formed or used to hold foreign financial assets, must file under Treas. Reg. §1.6038D-6.
Can I correct a prior-year Form 8938 mistake?
Yes. You can file an amended return on Form 1040-X with a corrected Form 8938 attached. For larger omissions, the streamlined filing compliance procedures may waive most penalties.
Does owning gold or cryptocurrency abroad trigger Form 8938?
No. Direct ownership of physical gold or self-custodied cryptocurrency is not a specified foreign financial asset. However, holding either in a foreign exchange account or financial institution generally does trigger reporting.
Is reasonable cause a defense to Form 8938 penalties?
Yes. Reasonable cause is a defense, but the taxpayer must prove it. Treas. Reg. §1.6038D-8(e) explicitly states that foreign secrecy laws and ignorance of U.S. tax law are not reasonable cause.
Do I use spot exchange rates or year-end rates?
No spot rates as a general rule. Use the Treasury year-end exchange rate for valuing assets, unless none is published, in which case you may use another publicly available rate and disclose the source.
Does filing Form 8938 increase audit risk?
No. Filing Form 8938 itself does not raise audit risk; it lowers it. The IRS already receives parallel data from foreign banks under FATCA, and matching mismatches drive audits, not the form’s existence.
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