Updated April 2025
As a U.S. taxpayer, you may be legally obligated to report your foreign assets to the IRS. Failure to do so can lead to significant penalties, but the rules are complicated. Read on to learn more about your tax obligations, or for immediate help, contact us at Wiggam Law to schedule a consultation.
Key takeaways
- Form 8939 – Required if you have certain foreign assets over a set threshold.
- Who should file? U.S. residents, citizens, and specified domestic partnerships and corporations.
- Filing threshold for taxpayers living in the United States – $50,000 at the end of the year or $75,000 at any point during the tax year and double for married filing jointly filers.
- Filing threshold for taxpayers living outside the United States – $200,000 at the end of the year or $300,000 at any point during the tax year and double for married filing jointly filers.
- How to file – Include with your annual income tax return.
- Penalties for failure to file – $10,000 to $50,000
What is Form 8938?
Form 8938 (Statement of Specified Foreign Financial Assets) requires taxpayers to report certain foreign assets with aggregate values over a set threshold.
The form requires you to provide your personal information, disclose your deposit accounts and their maximum value, disclose your custodial accounts and their maximum value, and any closed foreign accounts. It also includes a section on other specified foreign assets. In addition to providing a summary of your foreign accounts, you must also list each account in detail on Form 8938. For those required to file it, Form 8938 is due at the same time as your tax return.
Why does the IRS require Form 8938?
Established by the Foreign Account Tax Compliance Act (FACTA). Form 8938 is part of the federal government’s growing battle to prevent taxpayers from stashing assets in offshore accounts to avoid paying taxes on them.
Who Should File Form 8939?
Specified individuals and domestic entities must file Form 8938 if their specified foreign assets are over the threshold for their filing status and where they live. If you live in the United States, you must file if your specified foreign assets are worth over $50,000 ($100,000 for joint filers) at the end of the tax year or over $75,000 ($150,000 for joint filers) at any point during the tax year.
What are specified individuals and entities?
Specified individuals include U.S. citizens, resident aliens of the United States for any part of the tax year, nonresident aliens who elect to be treated as resident aliens on a joint tax return, and nonresident aliens who are bona fide American Samoa or Puerto Rico residents.
Specified domestic entities include domestic corporations and partnerships closely held by a specified individual where at least 50% of the organization’s gross income is passive or at least 50% of its assets are held to produce passive income. It also includes domestic trusts with at least one or more specified persons as beneficiaries.
What if I’m not required to file a tax return?
If you are not required to file a tax return – for example, your income is under the reporting threshold for your filing status – you do not need to file Form 8938 even if your assets are over the threshold.
What are the asset thresholds for Form 8938?
Single filers who live in the United States must file Form 8938 if the value of their specified foreign assets is more than $50,000 on the last day of the tax year or more than $75,000 at any point in the tax year – this includes the head of household and married filing separately filers. The thresholds are doubled to $100,000 and $150,000 for married taxpayers who live in the United States and file jointly.
Taxpayers who live abroad have higher thresholds. If you file as married filing jointly, you only have to report specified foreign assets worth over $400,000 at the end of the tax year or worth over $600,000 at any point during the tax year. These limits are cut in half for all other filing statuses (single, married filing separately, and head of household).
How do you calculate the value of your foreign assets?
All values should be calculated based on the currency exchange rate on the last day of the year. The IRS requires that you use the U.S. Treasury Bureau of the Fiscal Service foreign currency exchange rate. If that exchange rate is unavailable, you should use another publicly accessible exchange rate. Note that you must provide the source of your exchange rate on Form 8938.
What is a taxpayer living abroad?
For the purposes of Form 8939, taxpayers living abroad include U.S. citizens whose tax homes are in another country because they are bonafide residents of another country or countries for the entire tax year, as well as U.S. citizens or residents who were in a foreign country for at least 330 days of a period of 12 consecutive months ending in the tax year.
Note that the tax code does not use the term resident or non-resident to distinguish between the foreign asset value thresholds for Form 8938. Instead, as detailed above, the code refers to taxpayers living in or out of the United States. Be sure that you understand this distinction, as it may determine whether or not you need to file.
Assets That Must Be Reported on Form 8938
You must report the following foreign assets on Form 8938 if the total value of your specified foreign assets is over the threshold for your situation:
- Bank accounts
- Brokerage accounts
- Stocks or securities issued by non-U.S. persons – for example, stocks issued by a foreign corporation or a bond issued by a foreign person.
- Interests in foreign entities – for example, a partnership interest in a foreign partnership, interest in a foreign retirement plan, or interest in a foreign estate.
- Financial instrument or contract from a non-U.S. person issuer – for example, an interest in a foreign-issued insurance contract.
Do I need to report foreign currency on Form 8938?
No, if you have foreign currency that is not in a financial account – i.e., you hold it directly – you do not need to report it on Form 8938.
Do I need to report foreign real estate on Form 8938?
No, you do not need to report foreign real estate on Form 8938. However, if the real estate is held by a corporation, partnership, trust, or estate, you may need to report your interest in that entity if the value of your assets is higher than the reporting thresholds that apply in your situation.
Do I need to report art, collectibles, or similar tangible assets on Form 8938?
No, if you hold these assets directly, you do not need to report them.
Do I need to report precious metals that I hold directly in a foreign country?
No, you do not need to report directly held precious metals. However, if you have gold certificates issued by a foreign person, they are not considered to be held directly and thus should be reported if you’re over the threshold. Additionally, if you have a contract with a foreign person to sell precious metals held for investment, you need to report that if you are over the applicable threshold.
As with any tax form or issue, there are exceptions and limitations. Working with a tax professional when you have foreign assets can help you avoid forgotten forms, missed deadlines, and expensive tax penalties.
How to File Form 8938
Start by noting your name, tax ID number, and type of filer. Most people will fill it out as a specified individual, but there is also space to mark that you are filing for a partnership, corporation, or trust.
In Part I, Foreign Deposit and Custodial Accounts Summary note the number of accounts you have, the maximum total value of all of them, and any closed accounts. In Part II, list your non-account specified foreign assets.
In Part III, list the interest, dividends, royalties, other income, gains, deductions, and credits earned for your deposit accounts and other foreign assets. Certain assets do not need to be included on Form 8938 if they are included on tax forms, which you detail in Part IV.
From there, you move into the time-consuming part of this form. You must first fill out detailed information for each deposit and custodial account, which is included in your earlier summary. For each account, be prepared to list the type of account, account number, when the account was opened, the maximum value during the year, how you calculated the value in U.S. dollars, and the name and address of the bank holding the account. You will likely need to include additional paperwork if you have more than one account to report. You then list the same information for each foreign asset disclosed.
When you have finished Form 8938 and verified its accuracy, submit it to the IRS with your tax return. If you hire a professional tax preparer, they will ask you questions and gather documents to prepare this form for you.
Penalties for Failing to File Form 8938
If you don’t file Form 8938, there is an initial $10,000 failure to file penalty. If the IRS notifies you that you have not filed and are required to do so, they may charge you an additional $10,000 after 90 days. They can continue to do so for each 30 days that you remain non-compliant, up to a total penalty of $50,000 for continued non-compliance. If the IRS charges you a penalty, you will receive Notice CP15.
People generally underestimate how far the U.S. government will go to ensure that foreign assets are accurately reported. It is relatively easy for the United States to find out if someone has not reported a reportable foreign asset. Many countries have FATCA model agreements, allowing the United States to receive information on taxpayers with foreign accounts.
Penalties for income not reported related to foreign assets
If you have unreported income related to assets that you did not correctly disclose by filing Form 8938, the IRS can assess a 40% underpayment penalty in addition to the non-filing penalty.
For example, say that you earned interest on one of your foreign accounts. You didn’t report the account on Form 8938, and you didn’t report the interest on your tax return. Now, let’s say the tax on the interest would have been $10,000. In this case, the understatement penalty is $4,000.
Form 8938 does not calculate the tax that you owe. It’s just a report of your specified foreign assets. However, when you complete section III of this form, you note any income generated by your foreign assets, and you will also note where you reported that income on your tax return.
What to Do If You Forgot to File
If you either failed to file Form 8938 for the most recent tax year or you have failed to file for multiple years, it is time to take your concerns to a tax professional. Luckily, if the IRS has not contacted you regarding your failure to file, you may be able to limit your financial losses with a variety of solutions.
Reasonable cause penalty relief
Depending on your circumstances, you may be able to avoid penalties if you can show that your failure to file was due to reasonable cause and not willful neglect. Reasonable cause means that events outside of your control – e.g., death or disasters – prevented you from filing.
Streamlined filing compliance procedures
This process involves gathering the necessary information for all of your foreign assets, including records from every year that you forgot to file Form 8938. You can then move forward with filing your amended tax returns, making sure to attach Form 8938 to each tax return.
Your attorney may also include a statement to explain why you did not previously file the form. Once you have accounted for all of your assets on Form 8938, go ahead and pay any taxes and penalties associated with your newly disclosed assets. This is only available to those who are not the target of an IRS civil examination or audit.
IRS Voluntary Disclosure Practice
If you willfully did not file Form 8938, you may qualify for the Voluntary Disclosure Program. This program is specifically designed for people who may have committed a tax crime and want to get back into compliance while minimizing penalties and criminal exposure. Talk with an attorney before taking this route.
What about quiet disclosures?
In some cases, filing a late or amended return is known as a quiet disclosure or silent disclosure. This should not be considered a viable option. The IRS is very good at collecting the money it’s owed, and taxpayers shouldn’t be surprised to have penalties assessed if they go this route. Working with a tax attorney who can help you craft a strong case for reasonable cause is much safer.
Mistakes to Avoid With Form 8938
The filing requirements for Form 8938 can be confusing, and mistakes can be costly for taxpayers. To protect yourself, avoid these common errors:
- Filing a return just because your assets are over the reporting threshold – If you’re not required to file a tax return, you’re not required to file Form 8938, regardless of the value of your specified foreign assets. Don’t waste your time or give the IRS unnecessary info about your finances.
- Including assets you don’t have an interest in – For example, assets that you’re merely a signatory on. This is a key distinction between Form 8938 and the FBAR, which requires you to report accounts on which you have signatory authority.
- Using the wrong threshold – The thresholds are significantly higher if you live out of the country, even if you’re still considered a U.S. resident for certain purposes.
- Excluding specified assets – If you’re unclear on which assets need to be reported, consult a tax attorney with international tax law experience.
- Filing late or amending without reasonable cause or amnesty – Filing late or amending your return to add Form 8938 is considered a backdoor or quiet disclosure and can expose you to significant penalties or other consequences. If you haven’t filed this form, you are not in compliance and should consult with an attorney.
Form 8938 vs. FBAR: What Are the Differences?
The FBAR, or Report of Foreign Bank and Financial Accounts, is similar to Form 8938 in several ways. Both forms report foreign assets, but the FBAR focuses specifically on foreign bank accounts with a relatively low reporting threshold ($10,000), while the FACTA includes many other assets with a much higher threshold.
Here is a breakdown of the differences:
- Who must file? Form 8938 may be required for U.S. individuals, trusts, partnerships, and corporations; the FBAR is generally required of U.S. persons with foreign assets.
- Where does the form go? Form 8938 goes to the IRS, and the FBAR goes to FinCEN.
- What about reporting thresholds? FBAR has a standard reporting threshold of $10,000. If the total value of your foreign accounts was higher than $10,000 at any point during the calendar year, you must file. Form 8938’s filing thresholds are higher, more complicated, and based on filing status and residential status.
- Which types of assets are reported? Your Form 8938 should disclose your foreign financial accounts and certain investment assets or interests. The FBAR generally requires information on your foreign financial accounts.
- When is it due? Form 8938 is due with your annual tax return. The FBAR is due April 15, but filers are granted an automatic extension to October 15 if they miss the initial deadline.
- What are the penalties for failing to file? Penalties for failure to file the FBAR depend on whether the violation is determined to be willful (the greater of $100,000 or 50% of the account balance) or non-willful ($10,000). The penalties are adjusted every year for inflation. The penalty for failing to file Form 8938 is set at $10,000 initially, and it may increase to up to $50,000 if you do not file after the IRS notifies you of your obligation to file.
Do I need to file both FBAR and Form 8938?
Yes, you may need to file both of these forms in some cases. If you are required to file Form 8938, which has much higher financial thresholds than the FBAR, the odds are good that you are also required to file an FBAR. If you meet the filing requirements for the FBAR but fall short of the Form 8938 requirements, you likely only have to file the FBAR.
This is a crucial question to ask your international tax professional when you file each year. The penalties for missing either Form 8938 or the FBAR are steep, and you definitely don’t want to be on the hook for tens of thousands of dollars. While the types of assets requiring disclosure vary between the FBAR and Form 8938, there is substantial overlap.
It’s important to note that filing one of these forms does not fulfill your requirements for the other. Although the information contained in each form is similar, they go to different places and have different purposes. Filing one could still leave you on the hook for penalties if you do not file the other.
When It’s Time to Talk to an Attorney
If you’ve submitted an inaccurate Form 8938 or haven’t filed Form 8938 despite meeting the filing requirements, talking to an attorney is the best thing you can do to protect your financial security and your standing with the IRS. The penalties for failing to file Form 8938 are steep, and the sooner you bring in a tax professional, the stronger your chances of getting a favorable outcome.
Are you concerned about your undisclosed foreign assets or income? The team at Wiggam Law can explain your options and help you find the best option for your situation. Schedule a consultation now by calling us at (404) 233-9800 or using our online scheduler. Tax problems can be stressful and overwhelming—don’t let them take over your life. Choose Wiggam Law for the answers and peace of mind you deserve.