Form 8938 is the Statement of Specified Foreign Financial Assets required under IRC §6038D (enacted as part of the Foreign Account Tax Compliance Act - FATCA - in 2010). It is a separate and distinct requirement from the FBAR (FinCEN Form 114). Both may apply to the same person in the same year. Both have their own penalties. And critically - filing one does not satisfy the other. Many US persons with foreign assets comply with one and unknowingly miss the other.
Form 8938 is required for US persons who have an interest in specified foreign financial assets with an aggregate value that exceeds the applicable threshold at year-end or at any point during the year. IRC §6038D(a). The thresholds vary by filing status and where the taxpayer lives:
| Taxpayer Category | Year-End Value | At Any Time During Year |
|---|---|---|
| Single / MFS - residing in the US | $50,000 | $75,000 |
| MFJ - residing in the US | $100,000 | $150,000 |
| Single / MFS - residing outside the US | $200,000 | $300,000 |
| MFJ - residing outside the US | $400,000 | $600,000 |
"Residing outside the US" for this purpose means meeting the requirements of IRC §911 (bona fide residence or physical presence test for the foreign earned income exclusion) or having a tax home in a foreign country and being present in a foreign country for at least 330 days during a 12-month period. Treas. Reg. §1.6038D-2(a)(3) and (a)(4).
Form 8938 covers a broader category of assets than the FBAR. "Specified foreign financial assets" under IRC §6038D(b) include:
Any account maintained at a foreign financial institution - bank accounts, brokerage accounts, custodial accounts, insurance contracts with cash surrender value, annuity contracts - qualifies as a specified foreign financial asset. This overlaps substantially with the FBAR definition of a "financial interest" or "signatory authority" over a foreign account.
This is where Form 8938 goes well beyond the FBAR. The following assets must be reported on Form 8938 even if they are not held through a foreign financial institution:
Notably absent from Form 8938 - and different from FBAR: foreign real estate held directly (not through a foreign entity) is not a specified foreign financial asset. A French vacation home owned directly by a US person is not reported on either Form 8938 or FBAR. But if that same property is held through a French SCI (a French real property company), the interest in the SCI is a specified foreign financial asset reported on Form 8938.
Certain assets are explicitly excluded from the Form 8938 reporting requirement under Treas. Reg. §1.6038D-3 (definition of specified foreign financial asset, including the §1.6038D-3(a)(3) exclusion for accounts maintained by U.S. payors; directly held foreign real property is not among the assets listed in §1.6038D-3(b)), §1.6038D-7 (duplicative reporting), and the Instructions for Form 8938 (foreign social security-type benefits):
The value reported on Form 8938 is the fair market value of the asset in US dollars, converted at the applicable exchange rate. For every specified foreign financial asset, report the maximum value, meaning a reasonable estimate of the asset's maximum fair market value during the tax year (an interest in a foreign estate, pension plan, or deferred compensation plan is valued at fair market value as of the last day of the tax year). IRC §6038D(c); Treas. Reg. §1.6038D-5.
Currency conversion generally uses the U.S. Treasury Bureau of the Fiscal Service rate on the last day of the tax year, both for year-end values and for the maximum value and "at any time" threshold calculation. The IRS publishes yearly average exchange rates - but the specific date rate is required for Form 8938, not the annual average. See the IRS's exchange rate resource at https://www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates for reference rates.
The Form 8938 penalty regime under IRC §6038D(d) is aggressive:
Penalties for Form 8938 failure can be avoided if the failure was due to reasonable cause and not willful neglect. IRC §6038D(g). The IRS looks at whether the taxpayer exercised ordinary business care and prudence in determining their filing obligations. First-time non-filers who come forward voluntarily through the Streamlined Filing Compliance Procedures may qualify for penalty relief. Voluntary disclosure and correction are always better than waiting for an IRS inquiry.
Form 8938 is not only for individuals. Domestic corporations, partnerships, and trusts that are specified domestic entities (formed or availed of to hold specified foreign financial assets; for corporations and partnerships, at least 80 percent held by specified individuals and at least 50 percent passive income or passive assets) may also be required to file Form 8938 if those assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the year. Treas. Reg. §1.6038D-6. This rule prevents individuals from using domestic entities to hold foreign assets and avoid FATCA reporting.
FATCA has two sides. Form 8938 is the US taxpayer's obligation. The other side is the obligation of foreign financial institutions (FFIs) - banks, brokers, insurance companies, funds - to report account information about US account holders to the IRS. FFIs that comply enter into agreements with the IRS or operate under intergovernmental agreements (IGAs) between their country and the US. FFIs that do not comply face a 30% withholding on US-source income paid to them.
The practical implication: foreign banks and brokerages are actively reporting US account holders to the IRS. The IRS receives this information and cross-references it against Form 8938 filings and FBAR filings. Non-compliance is increasingly visible to the IRS without audit - the data flows automatically.