US Tax Form 8938 Explained
Introduction to IRS Form 8938
Reporting Foreign Assets
If you have financial assets outside of the United States, the IRS wants to know about them. This is done through Form 8938, the Statement of Specified Foreign Financial Assets. Its purpose is simple: to increase transparency and ensure U.S. taxpayers report their worldwide income correctly.
This form is filed along with your annual income tax return. It gives the IRS a clear picture of your foreign financial holdings, helping to prevent tax evasion through offshore accounts.
Form 8938 is a key part of the Foreign Account Tax Compliance Act, or FATCA. This law was enacted to combat tax evasion by U.S. citizens and residents holding assets in other countries. FATCA requires foreign financial institutions to report information about accounts held by U.S. taxpayers to the IRS. Form 8938 is the taxpayer's side of that reporting, creating a system of checks and balances.
U.S. citizens, resident aliens, and certain nonresident aliens must report worldwide income from all sources, including foreign accounts.
What to Report
The term "specified foreign financial assets" covers more than just a simple bank account. You generally need to report assets like:
- Financial accounts maintained by a foreign financial institution (e.g., bank accounts, brokerage accounts).
- Stock or securities issued by a non-U.S. person.
- Any other financial instrument or contract held for investment with a non-U.S. issuer or counterparty.
- Any interest in a foreign entity, like a foreign partnership, corporation, or trust.
However, you don't need to report assets like foreign real estate held directly. If the real estate is held through a foreign corporation or partnership, then your interest in that entity would be reportable.
Think bank accounts, investments, and business interests held outside the U.S.
Do You Need to File?
Not everyone with foreign assets needs to file Form 8938. The requirement depends on the total value of your specified foreign financial assets. The thresholds vary based on your tax filing status and whether you live in the United States or abroad.
| Filing Status & Location | Asset Value on Last Day of Year | Asset Value at Any Time During Year |
|---|---|---|
| Unmarried (or Married Filing Separately) in the US | More than $50,000 | More than $75,000 |
| Married Filing Jointly in the US | More than $100,000 | More than $150,000 |
| Unmarried (or Married Filing Separately) Abroad | More than $200,000 | More than $300,000 |
| Married Filing Jointly Abroad | More than $400,000 | More than $600,000 |
These thresholds are based on the aggregate value of all your specified foreign financial assets. If your holdings meet or exceed these amounts, you'll need to include Form 8938 with your tax return. This reporting helps ensure everyone pays their fair share, regardless of where their assets are located.