A missed Form 8938 can cost $10,000 before the IRS has looked at whether you owed a cent of tax. The form reports foreign assets, not foreign income.
So founders file a clean return, pay everything they owe, and still get penalized. Here is who files, at what asset level, and what actually counts.
TL;DR
- Thresholds: They start at $50,000 for a single filer living in the US and rise to $600,000 for a couple living abroad.
- What counts: Foreign accounts and foreign-issued investments count. Directly held foreign real estate and physical foreign currency do not.
- Who files: Individuals, but also closely held US corporations and partnerships that hold foreign assets and earn mostly passive income.
- How to file: It attaches to your income tax return across six parts, and moves with that return when you extend.
- Not the FBAR: Form 8938 goes to the IRS with your return, the FBAR goes to FinCEN at a $10,000 threshold, and filing one does not discharge the other.
- What it costs: $10,000 to start, up to $60,000 in civil penalties, plus an income tax return that may never close.
What Is Form 8938, and What FATCA Has to Do With It
Form 8938, officially the Statement of Specified Foreign Financial Assets, reports the foreign assets you hold to the IRS. You attach it to your annual income tax return rather than filing it separately.
It reports holdings, not income. Filing one creates no tax bill on its own, and an asset can appear on the form while producing nothing taxable that year. The obligation is disclosure, and it runs independently of what you owe.
The form exists because of FATCA, the Foreign Account Tax Compliance Act, enacted in 2010. Most individuals first filed Form 8938 with their 2011 return, so the requirement is now well over a decade old.
FATCA works on two tracks:
- Foreign financial institutions report their US account holders to the IRS
- US taxpayers separately report the same assets themselves
The IRS may therefore already hold a report from your bank in Bengaluru or Singapore before you file anything. Form 8938 is your side of a match the IRS can run without asking you first.
Form 8938 Reporting Thresholds: Find Your Row
Two numbers decide whether you file, and you cross the line by hitting either one. The first tests your assets on the last day of the tax year. The second tests the highest point at any moment during the year.
That second test catches people. You can end December under the threshold, having been well over it in June, and still have to file.
| Who you are | More than this on the last day of the year | Or more than this at any time during the year |
|---|---|---|
| Single or married filing separately, living in the US | $50,000 | $75,000 |
| Married filing jointly, living in the US | $100,000 | $150,000 |
| Single or married filing separately, living abroad | $200,000 | $300,000 |
| Married filing jointly, living abroad | $400,000 | $600,000 |
| Specified domestic entity (US corporation, partnership or trust) | $50,000 | $75,000 |
"Living abroad" is a defined test, not a self-assessment. You generally qualify if you are a bona fide resident of a foreign country for the full tax year, or if you were physically outside the US for at least 330 days in a 12-month period.
Couples filing jointly file one combined Form 8938, not two. Report a jointly owned asset once, at its full value, rather than splitting it between you.
One rule cuts the other way and saves people work. If your income is low enough that you are not required to file an income tax return at all, you are not required to file Form 8938, however large your foreign holdings are.
What Counts as a Specified Foreign Financial Asset (and What Doesn't)
The reportable set is narrower than "everything I own overseas." The dividing line runs roughly between financial holdings and physical ones.
| Reportable | Not reportable |
|---|---|
| Foreign bank and brokerage accounts | Foreign real estate you own directly |
| Foreign stock or securities held outside an account | Physical foreign currency |
| Interests in foreign partnerships and foreign entities | Accounts held at a US financial institution |
| Foreign mutual funds and foreign pension interests | Foreign social security equivalents |
| Financial contracts with a non-US counterparty | Assets already marked to market under another rule |
| Foreign-issued life insurance or annuities with cash value | Physical assets like art, gold or property held directly |
Real estate is worth understanding properly, because the answer flips on how you hold it. An apartment in Mumbai bought in your own name is not a specified foreign financial asset and does not go on Form 8938.
Put that same apartment inside a foreign company and the position reverses. Your interest in the company is a specified foreign financial asset, and you report the interest in the entity rather than the building.
Foreign currency follows a similar logic. Cash in your hand is not reportable, but the same money sitting in a foreign bank account is, because the account is the reportable item.
Who Actually Has to File
Form 8938 applies to two groups: specified individuals and specified domestic entities. The second group is where business owners get caught, because a US company can have its own filing obligation.
Specified Individuals: More Than Just Americans Abroad
A specified individual is a US citizen, a resident alien, or certain non-resident aliens who elect to be treated as residents. The category is wider than "US citizen living overseas."
Resident alien is the phrase doing the heavy lifting. You can hold a foreign passport, have never taken US citizenship, and still be a resident alien for tax purposes through a green card or the substantial presence test.
The substantial presence test counts the days you were physically in the US across three years:
- Every day you were present this year
- One third of the days from last year
- One sixth of the days from the year before that
Cross 183 on that weighted count, with at least 31 days this year, and you are generally a US tax resident.
Nobody sends you a notice when you cross it. The test runs on your travel history, so frequent visitors can become tax residents without a visa status ever changing.
The Founder Case: You Moved to the US and Your Assets Didn't
Once you pass the substantial presence test, the accounts you left at home become specified foreign financial assets, and $50,000 is not a high bar for someone with ten years of savings behind them.
The usual shape is a founder relocating from India or Singapore to run a US entity. They become a US tax resident within a year or two. Their money stays exactly where it was:
- A salary account still open at their old bank
- A demat account holding listed shares
- A handful of mutual funds
- A provident fund balance built over a decade of employment
None of it generates much US tax, and some may be sheltered under a treaty. The reporting obligation is unaffected either way.
What makes this a trap is that the founder has no US tax history and no reason to think a form about foreign assets applies to them, because they are not an expat and never thought of themselves as one.
Specified Domestic Entities: When Your US Company Has to File
A US corporation or partnership can have its own Form 8938 obligation, separate from anything its owners file. This catches holding companies and founder-owned structures that were never built with disclosure in mind.
Your entity may be a specified domestic entity if it meets both of these tests:
- Closely held: one specified individual owns at least 80% of the voting power or value of the stock, or at least 80% of partnership capital or profits, on the last day of the tax year.
- Mostly passive: at least 50% of gross income is passive, or at least 50% of assets produce passive income or are held to produce it.
Passive income here means dividends, interest, rents, royalties, annuities and certain gains. A single-owner US holding company sitting on foreign investments can meet both tests without its owner ever considering the question.
The entity threshold is $50,000 and $75,000, the same as a single individual living in the US. It does not scale up with the size of the company.
Domestic trusts reach the same status by a different route. A trust is a specified domestic entity if a specified person is a current beneficiary, meaning anyone entitled to, or who may at someone's discretion receive, a distribution of income or principal during the year.
Neither the 80% test nor the passive income test applies to a trust. Holders of a general power of appointment count as current beneficiaries too, whether or not the power was ever exercised.
How to File Form 8938, Part by Part
Form 8938 is attached to your income tax return and filed with it. It goes in with Form 1040 for an individual or the relevant business return for an entity, and it is due when that return is due, extensions included.
If you extend your return to October 15, Form 8938 moves with it. There is no separate deadline and no separate filing system, which is why it gets forgotten when a return is prepared in a hurry.
The form itself runs to six parts:
- Part I: summary of foreign deposit and custodial accounts, with the maximum value of each.
- Part II: summary of other foreign assets, meaning holdings not sitting in an account.
- Part III: a summary of the tax items, interest, dividends, gains and so on, attributable to the reported assets, and where each appears on your return.
- Part IV: assets excepted from detailed reporting because they are already disclosed on another form.
- Part V: account-by-account detail for everything summarized in Part I.
- Part VI: asset-by-asset detail for everything summarized in Part II.
Part IV saves duplicated work. If an asset is already reported on Form 3520, 5471, 8621, 8865 or 8858, you identify the other form here instead of repeating the full detail.
On valuation, you report the maximum value during the year, converted to US dollars at the year-end exchange rate published by the US Treasury, not the rate on the day the balance peaked.
Form 8938 vs FBAR vs Form 8939
Three form numbers get confused with each other, and only two of them are live forms. The distinction matters, because filing one does not discharge the other.
| Form 8938 | FBAR (FinCEN Form 114) | |
|---|---|---|
| Filed with | Your income tax return | FinCEN, through the BSA E-Filing System |
| Goes to | IRS | FinCEN (Treasury) |
| Threshold | $50,000 and up, depending on status | $10,000 aggregate, at any point in the year |
| Covers | Accounts plus non-account assets like foreign stock | Foreign financial accounts only |
| Deadline | With the return, including extensions | April 15, with an automatic six-month extension |
| If you don't file | $10,000, rising to $60,000 in civil penalties | Statutory base of $10,000 non-willful, or the greater of $100,000 and 50% of the balance if willful, each adjusted annually for inflation |
One difference in those penalty columns is worth noting. The Form 8938 amounts are fixed in the statute and do not move, while the FBAR amounts are adjusted for inflation every year and now run materially above their headline figures. Check FinCEN's current penalty table before relying on either number.
Filing Form 8938 does not relieve you of the FBAR requirement, and filing the FBAR does not relieve you of Form 8938. Many people with foreign accounts owe both, and the FBAR usually triggers first because $10,000 is a far lower bar.
Form 8939 is a different form and almost certainly not the one you want. It was the Allocation of Increase in Basis for Property Acquired From a Decedent, used only for estates of people who died in 2010, during the one-year lapse in the federal estate tax.
Its filing deadline passed in January 2012 and it has been obsolete since. If you searched for 8939 and landed here, 8938 is almost certainly the form you want.
What Happens If You Miss It
The penalty structure is built to escalate, and the first $10,000 does not depend on you owing any tax.
| What triggers it | Exposure |
|---|---|
| Failure to file when required | $10,000 flat, whether or not you owe tax |
| Still not filed after IRS notification | Up to $50,000 more, taking civil exposure to $60,000 |
| Understatement traced to an undisclosed foreign asset | 40% accuracy-related penalty on top |
| Failure to file | Statute of limitations on the whole return stays open until three years after you eventually file the Form 8938 |
| More than $5,000 of income omitted from a specified asset | Assessment window on that return goes from three years to six |
That limitations point lasts longest of all. A return you assumed had closed years ago may still be open, and it stays open on the whole return, not just the foreign piece.
Relief exists but is narrow. No penalty applies where the failure is due to reasonable cause and not willful neglect, and the burden sits with you to establish it on the facts.
One argument is ruled out in advance. The IRS states plainly that a foreign jurisdiction imposing its own civil or criminal penalty for disclosing the information is not reasonable cause. Bank secrecy in the other country is not a defense here.
A presumption rule applies if you cannot establish value. Where the IRS determines you hold a specified foreign financial asset and you do not produce enough information to value it, you are presumed to be over your threshold.
Five Mistakes That Put Founders on the Wrong Side of Form 8938
The failures we see are rarely people hiding money. They are people applying a reasonable-sounding rule that happens to be the wrong one.
Treating the Year-End Balance as the Only Test
Checking your December 31 balance, finding it under $50,000 and stopping there misses half the rule. The maximum value at any point during the year carries its own threshold, and it is the one people fail.
Single events clear it without the year-end number moving at all:
- Proceeds from a property sale sitting in a foreign account for a few weeks
- An annual bonus or ESOP payout landing before it is moved
- A maturing deposit paid out mid-year and reinvested elsewhere
- An inheritance received and later distributed
Money that arrived in March and left in May still counted while it was there. Pull the maximum balance for every foreign account before you conclude you are under.
Assuming a Treaty Removes the Reporting Obligation
A tax treaty may reduce or eliminate what you owe on foreign income, and founders reasonably conclude that an asset the US cannot tax is an asset the US does not need to hear about.
Reporting and taxation run on separate tracks. Form 8938 asks what you hold, not what you owe, so an asset can be fully sheltered from US tax and still belong on the form.
The gap matters most for retirement and pension balances, where treaty treatment is often favourable and balances are often large enough to clear the threshold on their own.
Filing the FBAR and Considering It Handled
One goes to FinCEN and the other to the IRS. Different agencies, different systems, different thresholds, and neither filing discharges the other.
Because the FBAR triggers at $10,000, most people encounter it first. Filing it feels like the foreign-account box has been ticked, and the 8938 obligation never gets examined.
The two also cover different ground. The FBAR covers accounts; Form 8938 also reaches foreign stock, partnership interests and other holdings that sit outside any account, so an FBAR can be complete while the 8938 picture is not.
Forgetting Assets That Do Not Feel Like Investments
Founders inventory what they think of as their portfolio and miss everything that does not feel like one. The threshold is measured on aggregate value, so dormant balances count as much as active ones.
Commonly missed:
- A salary account left open after moving countries
- A provident or pension fund from a previous employer
- An inherited share of a family holding
- A small interest in a relative's business back home
Individually none of these looks like much. Added together they clear $50,000 more often than founders expect, particularly where a pension balance has been compounding untouched for years.
Leaving It to Whoever Files the Return
Form 8938 is only prepared if someone asks about foreign assets while the return is being built. A preparer who was never told about an account overseas will not produce the form.
The obligation stays with the taxpayer regardless. "My accountant didn't ask" has no standing as reasonable cause, and the penalty lands on you rather than the preparer.
This is worth raising explicitly rather than waiting to be asked, especially in a first US filing season, when a preparer has no history with you and no reason to suspect foreign holdings exist.
If You Have Already Missed a Filing
Missing a year is common and usually fixable. The route depends on one question: did you report and pay tax on the income from those assets?
| Delinquent Procedures | Streamlined Domestic Offshore | Streamlined Foreign Offshore | |
|---|---|---|---|
| Use when | Income reported, form omitted | Income unreported, non-willful, living in the US | Income unreported, non-willful, meets the non-residency test |
| What you file | Missing Form 8938 with an amended return, plus a reasonable cause statement per year | 3 years of amended returns, 6 years of FBARs | 3 years of amended returns, 6 years of FBARs |
| Penalty | Not waived automatically; expect the IRS to assess first | 5% of the highest aggregate value of the assets subject to it | None |
| Availability | Closed once the IRS contacts you or opens an exam | Same | Same |
Non-willful is a defined standard you certify to, covering negligence, inadvertence, mistake, or a good faith misunderstanding of the law. It is not a box you tick lightly.
Under the delinquent route, the IRS may assess a penalty before anyone reads the reasonable cause statement attached to your filing. Expect correspondence rather than silence, and keep the supporting facts ready.
Warning: none of these procedures remain available once the IRS has already contacted you or opened an examination.
That cut-off is the strongest argument for acting early rather than waiting to see whether anything happens.
Filing defensively when you are unsure carries a real trade-off. A protective filing limits penalty exposure and starts the limitations clock running.
It also commits you to a valuation and a position you will have to stand behind later. Work through it with a tax professional who can see your full facts first.
How FinStackk Helps With Foreign Asset Reporting
Form 8938 attaches to a return, so it is only ever as reliable as the filing calendar behind it. Our Fin-Tax module tracks federal, state, county and city deadlines in one place and files extensions automatically when a return cannot be completed on time.
Every entry is reviewed by real CPAs and CAs, not chatbots. If you are unsure whether your US entity is a specified domestic entity, book a free demo and we will work through it with you.
Frequently Asked Questions
Who is required to file Form 8938?
Specified individuals and specified domestic entities holding specified foreign financial assets above their reporting threshold must file. Specified individuals include US citizens, resident aliens, and certain non-resident aliens electing resident treatment. Specified domestic entities are closely held US corporations, partnerships and certain trusts that are mostly passive. If you are not required to file an income tax return, you are not required to file Form 8938.
What is the difference between Form 8938 and the FBAR?
They go to different agencies under different rules. Form 8938 goes to the IRS with your tax return and covers accounts plus non-account assets such as foreign stock, starting at $50,000. The FBAR goes to FinCEN through the BSA E-Filing System, covers financial accounts only, and starts at $10,000. Filing one does not satisfy the other, and many people with foreign accounts are required to file both.
What happens if I forget to file Form 8938?
The initial penalty is $10,000, rising by up to $50,000 more if you do not file after IRS notification. A 40% accuracy-related penalty may apply where an understatement is traced to an undisclosed asset. The failure can also keep the statute of limitations on your whole return open until three years after you file the form. Relief may be available where the failure was due to reasonable cause and not willful neglect, so speak to a tax professional about your facts.
Related reading
If your foreign holdings include ownership in overseas corporations, review our Form 5471 filing guide.