By Lynn K. Ching
Much has been written about the plethora of Foreign Financial Disclosure Forms and the insanely huge penalties that accompany a failure to file these forms. Form 8938 is one of several such forms which you may be required to file, depending on the facts of your specific circumstance.
Basics
Certain U.S. taxpayers (citizens, resident aliens, certain non-resident aliens) and specified domestic entities holding certain financial assets 1 outside the United States must report those assets to the IRS generally using Form 8938, ‘Statement of Specified Foreign Financial Assets’.
In general, you are obligated to file the Form 8938 if the aggregate value of these assets exceeds $50,000, 2 but in some cases, the threshold may be higher as set forth below.
● Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year
● Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax
● See Instructions for Form 8938 threshold amounts for Taxpayers Living Abroad or for Specified Domestic Entities.
1 Do not confuse the Form 8938 with the FBAR, Form 114. Even if you do not have a Form 8938 filing requirement, you may have a FBAR, Form 114 requirement (and vice versa)
2 Even if your assets are below the filing threshold, you may still have a filing obligation to file the FBAR, Form 114.
The Form 8938 must be attached to a taxpayer’s annual tax return.
Which Foreign Financial Assets Are Reportable on Form 8938?
The following is a non-exhaustive list as to which foreign assets must be reported on the Form 8938.
| Foreign Asset | Reportable on Form 8938? |
| Foreign Accounts held at Foreign Financial Institution | Yes |
| Financial account held at a foreign No branch of a U.S. financial institution | No |
| Financial account held at a U.S. branch of a foreign financial institution | No |
| Foreign financial account for which you have signature authority | No, unless you have an interest in the account |
| Foreign stock or securities not held in a Financial account | Yes |
| Foreign partnership interests | Yes |
| Indirect interests in foreign financial assets through an entity | No |
| Foreign mutual funds | Yes |
| Domestic mutual fund investing in foreign stocks and securities | No |
| Foreign real estate held directly | No |
| Foreign currency held directly | No |
| Foreign-issued life insurance or annuity contract with a cash-value | Yes |
| Foreign accounts and foreign non-account investment assets held by foreign or domestic grantor trust for which you are the grantor | Yes |
| Personal property, held directly, such as art, antiques, jewelry, cars and other collectibles | No |
Limited
Escape Hatch However, U.S. taxpayers who do not have to file an income tax return for the tax year do not have to file Form 8938, regardless of the value of their specified foreign financial assets. For example, if your income is so low that you do not have a tax return filing requirement, you do not have to file a Form 8938 even if the value of your specified foreign financial assets exceeds the threshold amount.
Additional Foreign Information Disclosure Forms
Depending on your individual circumstance, (and even assuming you are not required to file a Form 8938), you may be obligated to file additional foreign disclosure information forms, including but not limited to Form 3520, Form 3520-A, FBAR, Form 5471, Form 5472, etc.
Lynn K. Ching is a partner and one of several attorneys at Diosdi Ching & Liu, LLP, located in San Francisco, California. Lynn may be reached at (415) 318-3990 or by email at lching@sftaxcounsel.com. This article is not legal or tax advice. If you are in need of legal or tax advice, you should immediately consult a licensed attorney.
Written By Anthony Diosdi
Anthony Diosdi focuses his practice on international inbound and outbound tax planning for high net worth individuals, multinational companies, and a number of Fortune 500 companies.
