Form 8938 and FATCA: Foreign Financial Asset Reporting for US Persons

FATCA, the Foreign Account Tax Compliance Act, changed the math on foreign accounts. Since 2010 it has required foreign banks and investment firms to identify their U.S. customers and report them to the IRS, and most of the world’s financial institutions now comply. Form 8938 is the individual side of that same law: your own annual statement of specified foreign financial assets, attached to your tax return. The IRS increasingly receives both reports, yours and your bank’s, and matches them.

Form 8938 vs. FBAR: Different Laws, Different Reports

The most common point of confusion is the relationship between Form 8938 and the FBAR . They overlap heavily, but neither replaces the other, because they come from different statutes and go to different agencies.

A U.S. resident with $60,000 in a foreign brokerage account files both. An expat with $30,000 across foreign accounts files only the FBAR (under the higher 8938 threshold abroad). Someone holding $200,000 of foreign private company shares directly, with no foreign account at all, may file only Form 8938. The two tests must be run separately every year.

Who Must File

Form 8938 is required of specified individuals: U.S. citizens, green card holders, and other tax residents, when the total value of their specified foreign financial assets crosses the applicable threshold. Certain U.S. entities formed to hold foreign assets file as well.

The thresholds are where filing status and residence matter:

Living in the United States:

Living abroad (tax home in a foreign country, meeting the bona fide residence or physical presence standard):

These figures are set by regulation and have not changed for years; they apply for 2025. Note the two-part test at each level: crossing either the year-end line or the any-point-during-the-year line triggers the filing.

What Counts as a Specified Foreign Financial Asset

The category is deliberately broader than the FBAR’s. It includes:

• Foreign financial accounts: bank, brokerage, and custodial accounts at non-U.S. institutions
• Foreign stock and securities held directly, outside any account: shares of a foreign family business, foreign bonds in certificate form
• Interests in foreign entities: foreign partnerships, foreign hedge funds and private equity funds, foreign trusts and estates you hold an interest in
• Foreign pensions and deferred compensation: many foreign retirement plans are reportable at their year-end value
• Financial instruments with foreign counterparties: notes receivable from foreign persons, foreign-issued swaps and derivatives, and foreign life insurance or annuities with cash value

Assets already reported on certain other international forms (Form 5471 for foreign corporations, Form 8865 for foreign partnerships, Form 3520 for foreign trusts) do not have to be duplicated in full on Form 8938, but they must still be identified on it, and the value still counts toward the threshold.

What Is Not Covered

The exclusions matter as much as the inclusions:

• Foreign real estate held directly. A condo in Medellín or a rental flat in Lisbon titled in your own name is not a specified foreign financial asset, full stop. But hold that same property through a foreign corporation, partnership, or trust, and your interest in the entity becomes reportable, with the real estate driving its value. The wrapper, not the property, controls.
• Foreign currency and tangible assets held directly. Physical cash, gold, art, and jewelry held personally abroad are not reportable (though a foreign account holding them may be).
• Accounts at U.S. institutions. A U.S. brokerage account full of foreign stocks is not foreign; the account’s location controls. The same logic exempts accounts at foreign branches of U.S. banks from Form 8938, even though the FBAR does reach them.
• Signature authority alone. Unlike the FBAR, Form 8938 only reaches assets you own or hold an interest in, not accounts you can merely sign on for an employer or relative.

How Assets Are Valued

The threshold test and the reporting both use each asset’s maximum value during the year, converted to U.S. dollars at the Treasury year-end exchange rate. In practice the IRS accepts reasonable estimates based on periodic account statements, so a foreign bank account’s highest statement balance for the year does the job; you are not expected to track daily highs. Foreign pensions with no readily available valuation are generally reported at the value of distributions received, or zero if none, a rule that saves many expat filers from impossible valuation exercises. Jointly held assets have specific counting rules: spouses filing jointly count a joint foreign account once, while a joint owner outside the return counts the full value toward their own threshold.

The Penalties, and the Quieter Statute-of-Limitations Problem

The headline penalty is $10,000 for failing to file, plus, if the failure continues more than 90 days after the IRS notifies you, $10,000 per 30 days up to an additional $50,000. Understatements of tax attributable to undisclosed foreign financial assets also carry a 40% accuracy-related penalty, double the usual rate.

If You Should Have Been Filing and Weren’t

Missed Forms 8938 rarely travel alone; the same accounts usually mean missed FBARs, and sometimes unreported interest or investment income. The cleanup path depends on the income question. If all income was reported and only the information returns were missed, delinquent forms with a reasonable cause statement are often enough. If foreign income went unreported, the streamlined filing compliance procedures are usually the right vehicle: three years of amended returns, six years of FBARs, and a defined penalty (or none for eligible taxpayers abroad) in exchange for resolving everything at once. Either way, the option exists only for taxpayers who come forward before the IRS makes contact, and FATCA data means the IRS increasingly already knows the accounts exist.

When to Seek Help

If your foreign holdings are one or two bank accounts with clean statements, Form 8938 is a manageable attachment. Get help when the assets include foreign pensions or insurance products with unclear valuations, entity interests that may trigger their own forms, multiple missed years, or any unreported income, where choosing the right disclosure path matters more than the forms themselves. This reporting sits at the center of our work with U.S. Persons with International Ties , and the annual filing is far cheaper than the cleanup.

Last updated: 2026