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Form 8938 FATCA Reporting: Foreign Asset Disclosure
Form 8938 FATCA reporting is how an individual tells the IRS about specified foreign financial assets, such as accounts at non-US banks and foreign stock, once those assets cross a dollar threshold. It is filed with your annual income tax return, not separately, and exists because of the Foreign Account Tax Compliance Act.
Key Takeaways
- Form 8938 FATCA reporting discloses specified foreign financial assets to the IRS with your tax return.
- US residents file once foreign assets exceed 50,000 dollars, or 100,000 dollars filing jointly.
- Many filers wrongly assume an FBAR filing also satisfies Form 8938; it does not.
- Failing to file carries a 10,000 dollar penalty that grows if ignored after IRS notice.
Key Takeaways
- Form 8938 FATCA reporting discloses specified foreign financial assets to the IRS with your tax return.
- US residents file once foreign assets exceed 50,000 dollars, or 100,000 dollars filing jointly.
- Many filers wrongly assume an FBAR filing also satisfies Form 8938; it does not.
- Failing to file carries a 10,000 dollar penalty that grows if ignored after IRS notice.
What Form 8938 FATCA Reporting Is
Form 8938, Statement of Specified Foreign Financial Assets, comes from Internal Revenue Code section 6038D, enacted as part of FATCA in 2010. Specified individuals and certain entities attach it to their federal income tax return to list foreign financial assets above a threshold.
Specified foreign financial assets include accounts held at foreign financial institutions, foreign stock or securities held outside an account, interests in foreign entities, and foreign-issued financial instruments. A US bank account or US-held mutual fund that invests abroad does not count, because the asset itself is held domestically.
The Intuition
Before FATCA, the IRS relied heavily on taxpayers self-reporting offshore income, which was easy to hide. FATCA added two pressure points. It required foreign banks to report US account holders, and it required US taxpayers to report the same assets directly on Form 8938.
The point is cross-checking. When a foreign bank reports an account and the taxpayer also reports it, the two records should match. A gap signals possible unreported income. Form 8938 is the taxpayer side of that reconciliation.
How It Works
The thresholds depend on filing status and where you live. For taxpayers living in the United States:
Unmarried: more than 50,000 at year-end OR 75,000 any time
Married joint: more than 100,000 at year-end OR 150,000 any time
For taxpayers living abroad the thresholds are much higher:
Unmarried abroad: more than 200,000 at year-end OR 300,000 any time
Married joint abroad: more than 400,000 at year-end OR 600,000 any time
You measure the total value of all specified foreign financial assets, not a single account. If the aggregate crosses either the year-end figure or the any-time-during-the-year figure, you file. You report the maximum value of each asset during the year, using year-end exchange rates published by the US Treasury to convert to dollars.
The penalty for failing to file is 10,000 dollars. If the failure continues after the IRS sends notice, additional penalties can reach 50,000 dollars, and a 40 percent penalty can apply to understated tax tied to undisclosed assets.
Worked Example
Suppose you live in the United States, file as single, and hold a brokerage account in Germany worth 60,000 dollars at year-end and a small foreign pension valued at 20,000 dollars. Your aggregate specified foreign financial assets total 80,000 dollars.
That is above the 50,000 dollar year-end threshold for an unmarried US resident, so you must file Form 8938 with your return. You list each asset, its maximum value during the year, and the institution. The same accounts likely also require an FBAR, since the combined value tops 10,000 dollars, but that is a separate filing with FinCEN.
Common Mistakes
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Assuming the FBAR covers it. The FBAR goes to FinCEN and Form 8938 goes to the IRS. They overlap but are not interchangeable, and many taxpayers must file both.
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Counting US-held assets. A domestic account holding foreign stock is not a specified foreign financial asset. Only assets held outside the US, or directly issued by a foreign person, count.
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Using the wrong threshold. Living abroad raises the threshold sharply. Applying the 50,000 dollar resident figure when you qualify for the 200,000 dollar abroad figure can lead to needless filing or vice versa.
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Ignoring the any-time test. You can be under the year-end threshold yet still required to file because the balance spiked above the higher any-time-during-the-year figure earlier in the year.
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Skipping it because there was no income. Form 8938 is an asset disclosure. You file based on value, even if the assets produced no taxable income that year.
Frequently Asked Questions
What is Form 8938 FATCA reporting in simple terms? Form 8938 FATCA reporting is a statement you attach to your tax return that lists foreign financial assets above a dollar threshold. It lets the IRS match what you report against what foreign banks report.
How does Form 8938 affect financial decisions? Holding assets at foreign institutions can trigger annual disclosure and steep penalties for omission, so investors weigh that compliance cost before opening offshore accounts. The reporting also surfaces other duties, such as filing for foreign corporations or passive foreign investment companies.
What is a real-world example of Form 8938? A single US resident with a 60,000 dollar German brokerage account and a 20,000 dollar foreign pension has 80,000 dollars in specified assets, above the 50,000 dollar threshold, so Form 8938 is required.
How can investors avoid Form 8938 penalties? Track the total value of all foreign financial assets across the year, not just at December 31, and file whenever either the year-end or any-time threshold is crossed. When in doubt, file, since the 10,000 dollar penalty dwarfs the cost of an extra form.
How is Form 8938 different from the FBAR? Form 8938 is filed with the IRS as part of your income tax return and covers a broader set of assets, while the FBAR is filed separately with FinCEN and applies once foreign accounts total 10,000 dollars. Many people must file both.
Sources
- IRS. "Summary of FATCA Reporting for U.S. Taxpayers." https://www.irs.gov/businesses/corporations/summary-of-fatca-reporting-for-us-taxpayers
- IRS. "About Form 8938, Statement of Specified Foreign Financial Assets." https://www.irs.gov/forms-pubs/about-form-8938
- IRS. "Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets?" https://www.irs.gov/businesses/corporations/do-i-need-to-file-form-8938-statement-of-specified-foreign-financial-assets
- Cornell Legal Information Institute. "26 U.S.C. 6038D - Information with respect to foreign financial assets." https://www.law.cornell.edu/uscode/text/26/6038D
Disclaimer
This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.