Form 8938: Statement of Specified Foreign Financial Assets
Filing Requirements
If you are a "specified person," Form 8938 is required to be filed with your tax return to report your interest in "specified foreign financial accounts" if the total value of all of your specified foreign financial assets exceeds a threshold. Okay, if you're really interested, here are the Instructions.
Specified foreign financial assets include cash amounts in foreign accounts, foreign securities, financial interests in foreign entities, and retirement accounts. This form requires details about each individual foreign asset, beyond just the total account balance that is included in Treasury Form 114 (FBAR). This does not include foreign rental property or foreign financial assets (currency or securities) that are held in a US financial institution. Here is a Comparison Chart of FBAR and 8938 requirements.
If you are married and filing jointly, and if the value of these foreign financial assets was more than $100,000 on the last day of the tax year or more than $150,000 at any time during the year, you are generally required to file this form. However, the filing requirement is increased to more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year if you live outside the United States and qualify for the foreign earned income exclusion.
If you are single or married filing separately, and if the value of these foreign financial assets was more than $50,000 on the last day of the tax year or more than $75,000 at any time during the year, you are generally required to file this form. However, the filing requirement is increased to more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year if you live outside the United States and qualify for the foreign earned income exclusion.
Exception: If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold.
Who Is A Specified Person?
This is defined a little differently than "United States person." A specified person could be a "specified individual" or a "specified domestic entity." You are a specified individual if you are one of the following:
- A US citizen.
- A resident alien of the United States for any part of the tax year (under either the green card test or the substantial presence test).
- A nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return.
- A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico.
You are a specified domestic entity if you are one of the following:
- A closely held domestic corporation that has at least 50% of its gross income from passive income, or at least 50% of its assets are held for the production of passive income.
- A closely held domestic partnership that has at least 50% of its gross income from passive income, or at least 50% of its assets are held for the production of passive income.
- A domestic trust (described in IRC Section 7701(a)(30)) that has one or more specified persons (a specified individual or a specified domestic entity) as a current beneficiary.
What Happens If You Don't File Form 8938?
A $10,000 penalty is imposed for failure to file, or properly report all the information requested. If the failure continues for more than 90 days after the IRS mails a notice of the failure, an additional $10,000 penalty will apply for each 30 day period (or fraction thereof) during which the failure continues after the 90 day period has expired. The additional penalty cannot exceed $50,000. See IRC Section 6038D. The reasonable cause exception applies.