Form 8938, titled "Statement of Specified Foreign Financial Assets," is used by U.S. taxpayers to report specified foreign financial assets when the total value exceeds applicable reporting thresholds. This form is required for certain individuals and specified domestic entities that have an interest in foreign financial assets, including foreign financial accounts and other foreign investment assets not held in an account. The reporting requirement is separate from, and in addition to, the FBAR (FinCEN Form 114), and filing one does not relieve you of the obligation to file the other if applicable.
Who Must File Form 8938?
- Individuals: U.S. persons (U.S. citizens, resident aliens, and certain nonresident aliens who elect to be treated as residents) who meet the reporting thresholds based on filing status and residency.
- Specified Domestic Entities: Certain domestic corporations, partnerships, and trusts that are formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets and meet the passive income or passive asset test must file Form 8938 if the total value of such assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the year..
Specified Foreign Financial Assets
Specified foreign financial assets include:
- Stocks issued by foreign corporations
- Capital or profits interests in foreign partnerships
- Bonds, notes, or other debt instruments issued by foreign persons
- Interests in foreign trusts or estates
- Derivatives (e.g., swaps, options) with foreign counterparties
- Retirement and pension accounts held abroad (if not covered by an IGA)
Interests in Foreign Assets
- Jointly Owned Assets: A joint owner is generally considered to have an interest in the entire value of the asset. For married taxpayers filing jointly, the value of jointly owned assets is counted once for threshold purposes.
- Foreign Grantor Trusts: If you are treated as an owner of a foreign grantor trust, you must report your interest. Reporting may still be required even if Form 3520 and Form 3520-A are filed, although duplication is reduced through reporting rules.
- Disregarded Entities: If you own a disregarded entity (such as a single-member LLC), you are treated as directly owning its underlying foreign financial assets for Form 8938 purposes.
- Children’s Unearned Income: If you elect to report your child’s unearned income on your return using Form 8814, you are generally treated as having an interest in the child’s specified foreign financial assets.
- Property Transferred for Services: You are considered to have an interest in property transferred in connection with the performance of services when the property becomes substantially vested or when a valid election under Section 83(b) is made.
Reporting Exceptions and Duplicative Filings
- If you report specified foreign financial assets on Forms 3520, 3520-A, Form 5471, Form 8621, or Form 8865 for the same tax year, you are not required to report the same assets again in detail on Form 8938. However, you must indicate the number of such forms filed in Part IV of Form 8938.
- Assets held in foreign financial accounts must still be reported on Form 8938 even if they are also reported on FBAR, provided the applicable Form 8938 thresholds are met.
Valuation and Reporting Thresholds
The total value of specified foreign financial assets must be determined using fair market value in U.S. dollars as of the last day of the tax year, and the maximum value during the year where required. Appropriate year-end exchange rates must be used for conversion.
For individuals, reporting thresholds vary by filing status and residency:
- Single or Married Filing Separately (living in the U.S.): $50,000 on the last day of the tax year or $75,000 at any time during the year
- Married Filing Jointly (living in the U.S.): $100,000 on the last day of the tax year or $150,000 at any time during the year
- Taxpayers living abroad (higher thresholds apply): generally $200,000/$300,000 (single) and $400,000/$600,000 (married filing jointly)
Source:
Form 8938 Instructions (IRS.gov)
Disclaimer: Always verify requirements with current IRS forms and instructions or consult a tax professional. State-specific rules may also apply.