Form 8938: Reporting Specified Foreign Financial Assets

Who may need to file

• Specified individuals, including many U.S. citizens and resident aliens, above the applicable asset threshold.
• Certain domestic corporations, partnerships, and trusts meeting the specified domestic entity rules.
• Individuals required to file an income tax return; individuals without that requirement generally need not file Form 8938.

What triggers the filing requirement

• Specified foreign financial assets exceeding a year-end or anytime-during-year threshold.
• Foreign accounts and certain directly held foreign investments within the form’s scope.
• Interests in foreign entities or contracts that qualify even without a foreign bank account.

When it is due

• Attach the form to the annual income tax return by its due date, including extensions.
• Use the income tax return extension process rather than the FBAR extension rule.
• Apply the correct reporting year and asset valuation rules before testing thresholds.

Common situations

• A U.S. resident holds savings and investments abroad.
• A qualifying taxpayer abroad has a higher applicable reporting threshold.
• A taxpayer already reports an entity on another international form and must evaluate cross-reference reporting.

Inventory assets before testing the threshold

List foreign financial accounts, foreign securities held outside an account, and relevant entity or contractual interests. Use the prescribed valuation and currency conversion rules rather than informal estimates. Different year-end and maximum-value tests can apply. Do not assume that an account below the FBAR threshold is irrelevant to Form 8938, or that a Form 8938 exemption resolves the FBAR analysis.

Avoid duplicate details without omitting disclosure

Some assets reported on designated international forms may qualify for reduced detail on Form 8938, but the required cross-references still matter. Their value can also remain relevant when determining whether the reporting threshold is met. For example, suppose a U.S. resident reports a foreign corporation on Form 5471. That does not automatically mean the corporation interest can disappear from the Form 8938 analysis.

Reconcile reporting with taxable income

Prepare year-end and maximum account values, ownership details, exchange rates, and a list of income associated with each asset. Reporting an asset does not determine whether its income is taxable, and filing an FBAR does not amend an income tax return. If an omission is discovered, review related income and other forms before correcting. Chirino USA can assess the overlapping requirements and any notices received.

Common mistakes

• Assuming filing an FBAR also satisfies Form 8938.
• Using one threshold for every filing status and residence situation.
• Treating directly owned foreign real estate as a specified financial asset without distinguishing an entity interest.

Potential penalties

• The statutory base failure-to-file penalty is $10,000.
• Additional penalties can apply when a failure continues after IRS notice.
• Tax understatements involving undisclosed assets can carry separate penalties and extended assessment periods.

Late filing considerations

• Reconstruct the facts for each affected year before choosing a correction procedure.
• Check whether income, tax payments, or other international forms also need correction.
• Preserve notices and response dates; reasonable-cause relief may be available depending on the facts.